UK Steel report highlights ongoing electricity cost gap with Europe

British steel producers continue to face significantly higher electricity prices than their European competitors, according to new data published today by industry group UK Steel. Despite recent government action, the sector still pays up to 25 percent more for power than peers in France and Germany.

The 2025/26 figures show that the average industrial electricity price in the UK will reach £59.48/MWh, compared to £52.04/MWh in Germany and £47.76/MWh in France. The resulting price gap of £7–12 per megawatt-hour translates into additional annual costs of £26 million for UK steelmakers.

The report, titled Closing the Power Price Gap: Securing the Future of UK Steel, argues that these costs directly undermine competitiveness, investment, and the industry's transition to low-carbon steelmaking. The sector is increasingly reliant on electric arc furnaces, where electricity is a key production input.

UK Steel calls for the swift introduction of two-way Contracts for Difference (CfDs) for industrial electricity to bring UK prices in line with Europe. It also urges the government to backdate the increase in network charge compensation to April 2025 to prevent another year of inflated energy bills.

Gareth Stace, Director-General of UK Steel, said the report shows "Britain’s steelmakers are still paying millions more for electricity than our European competitors" and added that "uncompetitive power prices pose a threat to jobs, future investment, and our Net Zero ambitions."

The report estimates that power costs can account for up to 180 percent of Gross Value Added in electro-intensive steel operations. Electricity use in the UK steel industry is already equivalent to 800,000 households and is expected to double with the move to electric furnaces.

UK Steel welcomed previous reforms, including the uplift of network charge compensation to 90 percent, which is expected to reduce electricity costs by £6.5/MWh. However, it warns that without further steps to address wholesale market disparities, the UK will remain at a structural disadvantage.

The Labour government has committed to tackling the issue. Its 2024 manifesto stated that "British industry is also held back by high electricity costs [...] Labour’s clean energy mission will drive down those bills, making British businesses internationally competitive."

Source: UK Steel, Photo: Fotolia