1 Energy Policy Is Economic Policy
The drive toward Net Zero is frequently positioned as a moral or existential imperative. But when policy collides with real-world economics, the results are often far less virtuous than intended. In the UK, where energy policy is increasingly dictated by carbon targets rather than cost-efficiency or energy security, the fallout is becoming unavoidable.
High energy prices are no longer a short-term shock — they are a structural issue. And they are slowly strangling productivity, hollowing out manufacturing, and deterring investment.
2 The Energy Cost Crisis: A Self-Inflicted Wound
The UK has some of the highest industrial energy prices in the world. As of 2023, industrial users in the UK paid approximately 25.85p per kilowatt-hour, nearly four times the rate in the United States (6.48p) and significantly higher than both Germany and France. In contrast, industrial users in China pay around 6.9p per kWh — making UK manufacturers nearly four times less competitive from an energy cost perspective.
This is not an accident.
It's a direct result of:
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The early and aggressive decommissioning of baseload energy (coal and gas)
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Overreliance on intermittent renewables without adequate storage
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Green levies and environmental surcharges passed on to commercial energy users
Two of the most power-hungry sectors are:
🟨 Heavy industry – from steel and glass to chemicals and food processing
🟨 Data centres and AI infrastructure – with electricity demand set to skyrocket as AI models scale and cloud computing expands
🟨 In chemical production, energy accounts for up to 60% of variable costs in segments like ammonia, methanol, and ethylene — materials essential to global agriculture and manufacturing.
🟨 In glass manufacturing, energy typically represents 30–35% of total production costs, largely due to extreme heat requirements (1,400–1,600°C).
When energy prices spike — or remain structurally elevated — these sectors cannot maintain global competitiveness.
And this is the key point: when all other things are equal — such as skilled labour, rule of law, infrastructure, and political stability — energy pricing becomes the swing factor. The UK already struggles with high corporate taxes and rigid regulation. Combine that with exorbitant energy costs, and the result is simple: companies will take their investment, their jobs, and their innovation elsewhere.
The consequences are being felt across sectors:
🟨 Energy-intensive industries like steel, chemicals, and ceramics are scaling back or moving operations abroad.
🟨 SMEs are closing due to unaffordable operating costs.
🟨 Even property investors are seeing net yields squeezed as utility bills surge for tenants and landlords alike.
Case Study:
BASF Europe’s largest chemicals producer reported an additional €3.2 billion in energy costs in 2022 — 84% of which occurred in Europe. BASF is now closing energy-intensive plants in Germany and investing instead in regions with cheaper, more stable energy policy — including the U.S. and China. This isn’t a reduction in production. It’s a strategic relocation driven by uncompetitive policy environments.
Quote: Sir Jim Ratcliffe (Ineos) “The UK is simply not a competitive place to manufacture right now… Energy prices and carbon costs are killing the sector.” Ineos has already shut down ethanol production at its Grangemouth site, citing these exact pressures.
3 UK Productivity: Choked by Green Compliance
The UK’s longstanding productivity malaise is often blamed on skills shortages or underinvestment. But energy costs are a hidden drag:
🟨 Rising input costs reduce output per unit across industrial sectors.
🟨 Landlords are spending capital on EPC-mandated retrofits that do little to improve operating efficiency or tenant experience.
🟨 Businesses face energy price volatility that makes long-term planning near impossible.
Productivity isn’t just about working harder — it’s about getting more output from the same input. Expensive, unstable energy undermines that equation.
4 China’s Advantage: Playing a Different Game
While Western economies embrace Net Zero with religious fervour, China continues to:
🟨 Commission hundreds of new coal plants
🟨 Subsidise manufacturing and energy-intensive industries
🟨 Dominate global supply chains for green tech — from solar to batteries
The result: the West offshores its emissions and its industrial power, while China strengthens its grip on both the old and new energy economies.
Net Zero in the UK is not leading the world — it’s isolating it.
5 What Should Investors Take From This?
🟨 Don’t confuse moral narratives with economic outcomes. Capital will follow productivity and cost-efficiency
🟨 UK assets reliant on energy-intensive business models or strict green compliance will face margin pressure.
🟨 Watch for countries or sectors diverging from Net Zero orthodoxy — they may be the best positioned for medium-term outperformance.
One Final Thought: This is not an argument against environmental stewardship or pollution control. Quite the opposite — pollution, not CO₂, is the real issue that deserves serious attention. The current Net Zero framework misplaces that focus. CO₂ is not inherently a pollutant — and there’s a growing body of evidence that higher CO₂ levels support agricultural productivity and global greening. By conflating carbon with pollution, we risk implementing economically destructive policies that don’t address the actual environmental threats we face. The UK economy needs energy that is affordable, abundant, and reliable — or it will continue to lose ground in a world that isn’t waiting.
💬 Your Turn: Speak Up or Get Squeezed Out
Are UK energy costs making your business or investments less competitive? Have you moved operations or capital elsewhere?
Drop your take in the comments — or message us directly. We’re building an investor-led perspective on how energy realities are reshaping the economy. Let’s compare notes.