Britain’s offices, cafes and hairdressers now consume more energy than factories amid warnings that high energy prices and net zero policies are crushing industry.
Energy consumption by industry dropped to a record low last year, official figures show, falling below that of service businesses such as restaurants, coffee shops and office-based businesses.
Factories were using around twice as much energy as the service sector in 1990 and three times as much during Britain’s industrial peak in the 1970s.
The slump comes amid concerns that Labour’s dash to net zero is sparking a damaging wave of de-industrialisation across Britain. Sir Jim Ratcliffe, the chief executive of Ineos, said this year that carbon taxes were “killing manufacturing”.
On Thursday, the Government insisted the decline was simply a continuation of a trend dating back to the 1970s, caused by “improvements in energy efficiency and a move from traditional manufacturing to higher-value processes”.
However, critics warned that the figures also reflected Britain’s shrinking industrial base.
Sam Richards, the chief executive of campaign group Britain Remade, said: “Britain has some of the highest industrial energy costs in the world, so it’s no surprise that industrial energy consumption is at an all-time low. If we’re serious about growing the economy, we must get these costs down.”
Impact of factory closures
Rian Whitton, of Bismarck Analysis, said the Government’s suggestion that the drop in industrial energy consumption was down to efficiency improvements was only part of the story. He pointed to the recent closures of factories in the chemicals industry as well as oil refineries in Scotland and Lincolnshire.
Mr Whitton said: “Output has been stagnant roughly since 2000 and is beginning to decline in real terms.
“The sudden closure of key sites like Ineos Grangemouth, Prax Lindsay and the Sabic Hull Olefin cracker, as well as the entire ammonia industry, is not going to be replaced quickly.
“This presages a more extreme drop in industrial output.”
A Sheffield factory making ferro-titanium, an alloy used in steel-making, joined the list of closures on Thursday. TiVac Alloys shut down production and entered liquidation after high electricity costs and low ferro-titanium prices rendered it unprofitable, according to industry publication Argus.
A separate analysis by the Office for National Statistics this year found that output in heavy industry had fallen by a third between 2021 and 2024.
This included a 29pc drop in the manufacturing of paper products, 30pc drop in petrochemicals, 31pc drop in inorganic, non-metal products such as ceramics and a 47pc drop in metals and castings.
It followed a huge rise in gas and electricity prices, triggered by the post-Covid economic recovery and then the outbreak of war in Ukraine. The latter prompted a scramble in Europe to find alternatives to Russian gas.
Energy consumption across the entire UK economy has been on a downward trend since the turn of the century, according to figures from the Department for Energy Security and Net Zero.
It rose slightly last year to about 128 million tonnes of oil equivalent (mtoe). That was up 2.3pc from a record low in 2023. The Government attributed this to cooler temperatures and lower energy prices compared to the previous year.
Energy consumption by the services sector rose by 3.8pc to about 22 mtoe, while industry’s usage fell 1.2pc to 19.5 mtoe.
The decrease in factory energy usage was driven by falling use of coal and electricity by the mineral products, metals and “other industries” sectors, as well as food and beverage manufacturers.
A Government spokesman said: “While energy consumption has fallen as a result of improved energy efficiency, we are also cutting energy costs for around 500 of the most electricity intensive businesses and delivering long-term certainty for investment and good jobs through our Industrial Strategy.
“This comes alongside our clean energy mission, which will get us off the rollercoaster of fossil fuel prices and provide businesses and households with lower bills for good.”
