Business
• Analysis
UK Steelmakers' Electricity Costs Hit Worst Gap With France in Three Years
UK steelmakers' electricity costs have climbed to almost £30 a megawatt hour above French prices, the widest gap in three years, according to analysis by the lobby group UK Steel, after the US-Israeli war on Iran sent global gas prices surging.
By Haut Monde Post
• October 19, 2026
• 3 Min Read
A premium that reversed three years of catching up
British steel has seen the electricity price premium it pays over France widen to nearly £30 a megawatt hour, the highest in three years, in analysis published by the lobby group UK Steel. The gap had been narrowing for three years and stood at £18 a MWh last year; its record was £153 in 2022, when Russia's invasion of Ukraine triggered a gas crisis. Against Germany, the premium slipped slightly to roughly £12 this year.
The comparison matters because about 75% of the UK's exported steel, worth some £3bn, goes to the EU.
Why gas sets the price of British power
Analysts put UK industrial electricity prices down to the country's reliance on gas for power generation, which weighs heavily on cleaner steelmaking in electric arc furnaces. Under market rules, the wholesale gas price sets the electricity price even when power comes from cheaper sources such as wind or solar.
- •Iran closed the strait of Hormuz in response to Donald Trump's bombing campaign, sending global gas prices soaring.
- •France's electricity prices are mainly determined by its nuclear reactors.
- •In Germany, coal still plays a large role in generation.
Steel's exposure and the call for a price cap
Under Keir Starmer, most of the government-policy costs added to heavy industrial electricity bills were removed last year. Even so, UK Steel's director general Peter Brennan says direct subsidies are now the only option left, and the group has proposed a cap on prices it estimates would cost about £51m a year, with government paying the difference above the cap and industry paying back when prices sit below it.
Brennan said British steelmakers are competing "with one hand tied behind their backs", and that despite government action the gap with France is worsening.
"We cannot rebuild British manufacturing while forcing our steelmakers to pay substantially more for electricity than their competitors.
The government's answer
A government spokesperson said bills are being cut by up to 25% for over 10,000 manufacturing businesses, with costs for the most electricity-intensive businesses reduced by around £1bn per year, delivering the prime minister's reindustrialisation pledge. Energy prices are among the main factors businesses cite as holding back British industry, described as perhaps the biggest obstacle to the reindustrialisation goal.
- •On Monday the government announced 'jobs plans' supporting more than 100,000 workforce opportunities across eight key growth sectors, focused on professional and business services, defence and construction.
- •Similar plans for financial services, clean energy and life sciences were already announced; plans for advanced manufacturing and the creative industries are expected to follow shortly.
The premium now stands at its highest level in three years. UK Steel wants the government to adopt its roughly £51m-a-year price cap, while the government points to the bill cuts and the further jobs plans expected shortly.
