One in ten British manufacturing companies believes it is likely or very likely to become insolvent within the next twelve months. That figure, drawn from a survey by Make UK, the manufacturers' trade body, points to a sector under sustained financial pressure, with energy costs identified as the central cause.

The survey covered companies across the breadth of British industry. Its findings indicate that the problem is not confined to a handful of struggling firms. A quarter of manufacturers have either moved production overseas or are planning to do so. Confidence has fallen to its lowest point in four years.

The United Kingdom's industrial energy costs are four times higher than those of the United States and approximately twice as high as those of competitors in continental Europe. The gap is structural. Britain's electricity pricing is determined by a marginal pricing system in which the cost of gas-fired generation sets the final market price, regardless of how the electricity was actually produced. The House of Commons library reported earlier this month that gas accounted for 30 per cent of UK electricity generation in 2024, compared with 16 per cent in Germany and 3 per cent in France. Britain's heavier dependence on gas makes it acutely sensitive to price rises in that market.

Those rises have accelerated since the outbreak of conflict in the Middle East.Since the start of hostilities, over half of the industrial enterprises polled by Make UK said their energy expenses have increased even more. Six in ten have passed these costs on to customers, yet 98 per cent still expect a significant squeeze on profitability over the coming quarter.

Companies are responding in ways that reflect the limits of their options. Large manufacturers, most of them foreign-owned, are shifting production to mainland Europe and Asia where running costs are lower. Smaller domestic firms have fewer choices. Nearly four in ten have delayed investment. More than a fifth have cut jobs. These are not contingency measures. For many, they are attempts to stay solvent.

The UK is urging the Treasury to pay for the carbon taxes and levies that are presently imposed directly on industrial users, using general taxes to finance the relief, as France and Germany already do. Around half of industrial energy bills consist of such charges, amounting to approximately £3 billion annually. Stephen Phipson, Make UK's chief executive, said the government could no longer afford to delay as, "the time for talking is over. The time for action is now."

The TUC has backed the demand. Its general secretary, Paul Nowak, warned that the jobs at risk are concentrated in some of the poorest parts of the country and called for the government's existing relief scheme to be extended. That scheme, the British Industrial Competitiveness Scheme, was extended in April and offers eligible heavy energy users a reduction of up to 25 per cent on their bills. It applies to around 10,000 companies. But it does not take effect until April 2027, and Phipson has said the delay makes it effectively irrelevant for companies that will not survive until then, even though support is backdated to this year.

The government acknowledged the difficulties manufacturers face and cited its contemporary industrial policy, which was released last summer, as proof of its dedication to the industry. It has also indicated it intends to review the marginal pricing system but has given no timeline or detail on how it would be reformed or replaced.

The stakes extend beyond the firms themselves. Britain's defence spending commitments have raised expectations that domestic manufacturers will supply much of what is needed. If the companies best placed to meet that demand have closed or relocated before contracts are awarded, the government's industrial ambitions and its security requirements come into direct conflict. The policy response exists. Whether it arrives in time is a separate question.