UK Industry Warns of Rising Energy Costs as Households Face October Price Cap Increase

London, 2 September 2025 – Britain’s industrial sector has warned that surging electricity costs are threatening competitiveness just as households prepare for a fresh rise in bills this October.

Ofgem has confirmed that the national energy price cap will rise by 2% from 1 October, taking a typical household dual-fuel bill to £1,755 a year – £35 more than the current cap of £1,720. While this increase is above analyst expectations, business groups say the situation is even more critical for industrial energy users, who already face some of the highest prices in the world.

Industrial Pressures Mount

According to the International Energy Agency, industrial electricity users in the UK have paid an additional £29 billion over the last four years compared with continental counterparts. Balancing costs, network constraints, and subsidies for renewable energy projects have all contributed to inflated prices.

The National Energy System Operator (NESO) revealed that wind curtailment – paying wind farms to switch off when the grid cannot absorb excess electricity – has been a major driver of balancing costs. These costs, along with payments to restart gas plants, amounted to £2.7 billion in the last financial year alone.

Sam Richards, chief executive of Britain Remade, commented:
“High energy costs are undermining both households and businesses. Our manufacturing sector cannot compete internationally while electricity costs remain four times higher than in parts of Europe. Without reform, the UK risks deindustrialisation at the same time as millions of families struggle with bills.”

Households Still Under Pressure

For households, the impact is immediate. The new cap adds £2.93 per month to an average dual-fuel bill. Standing charges are also set to rise, with electricity increasing 4% to 53.68p per day and gas climbing 14% to 34.03p per day.

From July to September 2025, electricity was priced at 25.73p per kWh with a daily standing charge of 51.37p. Gas stood at 6.33p per kWh with a daily standing charge of 29.82p.

From October to December 2025, these will increase slightly, with electricity rising to 26.35p per kWh and a daily standing charge of 53.68p. Gas will move to 6.29p per kWh alongside a higher daily standing charge of 34.03p.

Volatility Remains

Analysts warn that electricity and gas markets remain volatile. Wholesale prices have stabilised in recent months, but international supply uncertainty, geopolitical tensions, and winter demand could trigger further spikes. Cornwall Insight forecasts only a modest reduction in January 2026, dependent on favourable conditions.

Dr Craig Lowrey, principal consultant at Cornwall Insight, said:
“Even with wholesale prices softening, structural costs such as grid balancing and subsidies are keeping UK bills elevated. Without policy reform, both households and industrial users will remain exposed to higher costs than international competitors.”

What Households Can Do

While government policy and industrial challenges may take years to resolve, households can take immediate action to reduce their exposure. Experts recommend:

• Using an energy bill calculator to check how the October cap affects their budget.
• Switching to fixed tariffs that are currently priced below the cap.
• Exploring dual fuel tariffs that offer discounts for combining gas and electricity.
• Comparing deals across multiple suppliers to find savings before winter.

Greg Marsh, an energy adviser, said:
“The cap is not the cheapest option. Many fixed deals undercut it today. Families that compare energy prices and switch now will enter winter with lower costs and greater peace of mind.”

Reform Needed for Industry and Consumers

Industry leaders argue that reforming planning rules, cutting red tape, and accelerating grid upgrades are essential if the UK wants renewable energy to reduce rather than raise costs. Without change, both consumers and businesses face a long period of high prices.

For households, the message is clear: switching and comparing tariffs remain the most effective way to cut bills. For industry, a broader debate is emerging over how to protect competitiveness while advancing net-zero ambitions.