British steel producers are expected to face electricity prices 49 percent higher than their French competitors and 15 percent higher than German steelmakers in the 2026-27 financial year, according to a new report published by UK-based trade association UK Steel in October 2026.
In its report titled “Competitive electricity prices: a prerequisite for reindustrialization”, the industry association estimates that electricity costs for British steel producers will average £90.55/MWh in 2026-27, compared to £78.62/MWh in Germany and £60.64/MWh in France, after accounting for available government exemptions and compensation.
The report also compares British electricity costs with those in selected non-European steel-producing markets, estimating prices of £40.20/MWh in Alberta, Canada, £53.96/MWh in Vietnam and £52.84/MWh in Turkey.
UK steelmakers face £66 million additional electricity costs in 2026-27
According to UK Steel, the electricity price disparity with France is expected to add approximately £66 million ($88.1 million) to British steel producers' electricity costs in 2026-27.
The association estimates that British steelmakers will have paid a cumulative £917 million ($1.22 billion) more for electricity than French competitors between 2017-18 and 2026-27. Compared with German competitors, the additional cost is estimated at £752 million ($1 billion) between 2016-17 and 2026-27.
UK Steel noted that wholesale electricity prices have become the main driver of the remaining cost disparity, despite government measures that have reduced differences in network charges and policy-related costs.
The association attributed Britain's higher wholesale electricity prices primarily to its dependence on natural gas for setting electricity market prices. It also pointed to the increase in natural gas prices following the US-Israel-Iran conflict as an additional source of pressure.
Electricity price disparities could affect investment in low-carbon steelmaking
UK Steel warned that persistently higher electricity prices could weaken the competitiveness and profitability of domestic steel production, particularly as the industry transitions toward electric arc furnace (EAF) technology.
According to the report, further electrification could more than double the UK steel industry's electricity consumption, increasing its exposure to electricity price differences with European competitors.
UK Steel calls for wholesale electricity price rebalancing mechanism
To address the cost disparity, UK Steel has urged the government to introduce a wholesale electricity price rebalancing mechanism for energy-intensive industries. The proposed mechanism would align British industrial wholesale electricity prices with those of major European competitors through a financial settlement arrangement.
According to UK Steel, the mechanism could reduce electricity costs for British steelmakers by approximately £24/MWh, bringing the estimated price down from £90.55/MWh to £66.55/MWh.
Based on modelling by energy consultancy Baringa, UK Steel estimates that the proposed wholesale price rebalancing mechanism would have an average annual net cost of approximately £51 million ($68.1 million) between 2026 and 2030, before generating an average annual net gain of £13 million ($17.4 million) between 2031 and 2035.
