UK energy policy was sold as a clean-up of the national grid. Catherine McBride, OBE, argues it has done something rather different: quietly dismantled the country’s industrial base. Speaking to Trade Treasury Payments, the Great British Business Council CEO and co-author of Premeditated Industrial Destruction? makes the case that high energy costs, not market forces, are pushing British manufacturing offshore.

Fossil fuels still supply close to 80% of UK energy, with natural gas alone accounting for roughly 40%. Yet the regulatory regime built around those fuels is, in McBride’s view, engineering a slow de-industrialisation rather than a managed transition. This article outlines what the video covers and why it matters for trade, treasury and payments professionals.

Why is UK energy so expensive?

McBride traces the problem to 2005 and the introduction of carbon emission costs. The intention was sound, but no equivalent charge applied among the UK’s major trading partners. That handed an immediate competitive advantage to importers: it became cheaper to buy goods from Asia, partly on wages and partly because there was no carbon cost attached. The advantage was not limited to emerging economies, since established producers such as Japan also operated without comparable pricing at first.

As McBride puts it, “Europe kind of started its own de-industrialisation.” The Carbon Border Adjustment Mechanism is meant to level the field, but in her view it arrives twenty years too late. The charge, she argues, should have been introduced alongside the original carbon costs so domestic industry stayed in roughly the same position as its competitors.

Steel: where high electricity costs bite hardest

Heavy industry shows the damage most clearly. The UK now relies on electric arc furnaces for nearly all steel production, a technology that has been in use elsewhere since the 1980s. The barrier to deploying it here has always been the cost of electricity, and that barrier has not gone away. UK electricity remains dearer than in France or Germany, and McBride argues that industry was sidelined from the political decisions that loaded those costs onto it.

The consequences are already visible. She points to Liberty Steel’s commercial electric arc furnace going out of business, leaving only producers with protected markets, such as Ministry of Defence supply, or those recycling low-grade rebar, as viable operations.

Have UK emissions actually fallen, or just moved?

The UK claims to have cut its territorial emissions by 300 million tonnes. McBride argues this hides as much as it reveals. Roughly 180 million tonnes of emissions are effectively imported, embedded in foreign goods and left out of the domestic tally. Net the two against each other and the real reduction looks small.

The genuine progress, she notes, came in the 1990s with the switch from coal to gas in electricity generation. That shift was economically driven and happened without carbon taxes or mandates. The headline figures, in her reading, mask a footprint that has been exported rather than removed, leaving the country dependent on global supply chains staying stable.

How much energy does the UK import?

The UK sits on substantial North Sea gas reserves but lacks the infrastructure to arbitrage or export them, it does not have a liquid natural gas conversion plant. The result is heavy import dependence, 50% of UK gas is imported, with around 75% of current gas imports arriving by pipeline from Norway. Norway also provides 40% of UK oil imports. Norwegian oil and gas comes from the North Sea even though the UK has limited is own oil and gas production and exploration there it is happy to import oil and gas from Norway as this reduces UK territorial carbon emissions.

That leaves the country sensitive to geopolitical shocks. McBride cites tensions between Iran and Qatar as a warning of potential shortages that could push oil and gas prices up sharply. With solar and wind output tied to unpredictable weather, she also raises the prospect of blackouts or load shedding.

The AI bottleneck

McBride sees the UK at a turning point on the next industrial wave. English is the primary language of AI development and the country has the talent to compete, but it may lack the infrastructure. Data centres are hugely energy-intensive and need constant, reliable power that the current grid struggles to deliver. In the United States, several states are already refusing new data centres unless they bring their own power generation.

She points to a major AI firm withdrawing a planned 31 billion pound investment from the UK specifically because the necessary electricity could not be guaranteed.

Data centre construction also requires large amounts of cement and steel. UK material costs are also higher due to the UK’s Emissions Trading System (ETS) which will soon be increased if the Government joins the EU’s ETS and adds the EU’s import charges on imported cement and steel called the Carbon Border Adjustment Mechanism.

What would change the trajectory?

McBride’s prescription is a return to economic pragmatism: faster, economically grounded decisions on gas, nuclear and flexible generation rather than change forced through regulation and taxation. Her warning is that when change is forced this way, the worst option tends to become the dominant one.

Why this matters for trade and treasury

For a trade and treasury audience, the implications stack up. Industrial competitiveness keeps eroding while energy costs stay structurally higher than competitor markets. Trade deficits risk widening as the UK imports more energy-intensive goods and loses domestic capacity. Agricultural resilience is exposed through reliance on imported ammonia, diesel and fertiliser. AI investment diverts elsewhere without reliable, affordable power. And energy security now hinges on faster domestic generation decisions, including gas fields already approved but stalled in repeated regulatory cycles.

Key takeaways

• UK carbon pricing created a lasting cost disadvantage against major trading partners.
• The largest genuine emissions cut came from the 1990s coal-to-gas switch, not recent policy.
• Imported emissions offset much of the UK’s claimed progress.
• AI growth is constrained by electricity supply, with investment already moving offshore.
• The UK has untapped hydrocarbons but lacks the infrastructure and political certainty to use them.

Original article on tradetreasurypayments.com