UK steelmakers face £30 per MWh electricity price gap with EU rivals

British steelmakers pay nearly £30 per megawatt hour more for electricity than their French competitors, according to energy pricing analysis published by UK Steel on October 18, 2026. The cost disparity represents the widest price gap between the two countries in three years, according to the report reported by The Guardian.

The electricity price gap with French steelmakers had narrowed to £18 per megawatt hour last year, down from a peak of £153 per megawatt hour in 2022 following Russia's invasion of Ukraine. The price gap with German competitors fell slightly this year to about £12 per megawatt hour.

Analysts attributed the UK's high electricity prices to its wholesale power market mechanism, which links electricity rates to gas generation costs. This pricing structure applies even to power produced by cheaper sources such as wind or solar power. Global gas prices surged recently after the US-Israeli war on Iran led to the closure of the Strait of Hormuz.

In contrast, French electricity prices are largely determined by nuclear reactors, while German power generation still uses coal heavily. High power costs affect electric arc furnaces used in cleaner steelmaking, which rely on affordable industrial electricity.

The cost disparity affects international trade, as the European Union buys about 75% of exported British steel, worth roughly £3 billion. High electricity prices remain the primary operational barrier cited by British industrial firms, according to UK Steel. Greater Manchester Mayor Andy Burnham described power costs as the main obstacle to reindustrialising the UK.

Under Prime Minister Keir Starmer, the government removed most policy-added electricity costs for heavy industry last year. However, UK Steel Director General Peter Brennan stated that direct subsidies are the only remaining option to support domestic producers. UK Steel proposed an electricity price cap that would cost an estimated £51 million a year, where the government pays the difference when prices exceed the limit and the industry pays the government if prices fall below it.