The City is paying the price for Britain’s energy failure
High, unstable energy costs don’t stay in the energy sector. They get absorbed into operating margins, debt-service forecasts, insurance assumptions, infrastructure returns, and the discount rate applied to British assets, says Alan Chang
The City does not need another price shock to understand Britain’s energy problem. Markets are already pricing the risk. Renewed tensions with Iran are just the latest reminder that the UK remains exposed to events it cannot control – because it hasn’t built enough energy capacity at home.
High, unstable energy costs don’t stay in the energy sector. They get absorbed into operating margins, debt-service forecasts, insurance assumptions, infrastructure returns, and the discount rate applied to British assets. The British Chambers of Commerce reported in February that 27 per cent of UK businesses are struggling to pay their energy bills, rising to 35 per cent among manufacturers. That’s a growth problem: it makes long-term investment harder to underwrite, and it makes London a harder place to finance growth from.
This is now a macroeconomic problem, not just an industrial one. UK business investment in 2025 was the lowest in the G7 as a share of GDP, and the IPPR puts the UK’s capital gap with its peers at 38 per cent, rising to 47 per cent in manufacturing. Energy is not the only driver of that gap, but it’s now one of the largest – and it’s the one the City prices into every British asset against an alternative.
That’s why the argument about net zero is too narrow. Net zero is a constraint on policy. It is not, by itself, an economic strategy. The real goal should be energy abundance: power that industry can plan around. That means clean generation where it can be built, domestic production where it makes sense, and enough reliable capacity to keep the system steady when the wind drops. A country can decarbonise and become poorer if the system it builds is expensive, fragile, and short of capacity.
The UK’s energy cost disadvantage is stark. According to the ONS, in 2023 the UK had the highest industrial electricity prices among 24 countries reporting to the International Energy Agency – well above France and Germany, and several times higher than the US and Canada. That’s not a marginal irritation for a handful of manufacturers, but a structural tax on doing business here. Where power is expensive or uncertain, expected margins fall and risk premia rise. The cost of capital climbs and the range of financeable projects narrows. OpenAI’s decision to pause its Stargate UK data centre project, citing high energy costs, is that calculation made visible. It won’t be the last.
The effect is already visible across the wider economy. Output in Britain’s energy-intensive manufacturing industries fell by a third between early 2021 and the end of 2024, with basic metals and castings down by almost half. These aren’t peripheral sectors – they supply construction, defence, chemicals, packaging, grid infrastructure, and advanced manufacturing. As they shrink, London is left with fewer productive assets to finance and a narrower industrial base behind its capital markets.
Capital is not the contraint
I run a UK energy business. From where I sit, the constraint isn’t capital. There is money available for energy generation, storage, grid, flexible demand, nuclear, transitional gas, and domestic supply chains. What investors dislike is a policy culture that treats energy demand as something to restrain – and treats building the system to meet it as a planning problem rather than an industrial priority. We set targets before we build capacity. We declare ambitions to become an AI superpower while grid access remains the single biggest barrier to the compute infrastructure AI requires.
That contradiction is becoming impossible to ignore. The government’s own AI Growth Zones paper concedes that getting enough power is critical, and that the current connection system is vastly oversubscribed. The future economy needs more electricity, delivered faster, at a price that makes commercial sense. Decarbonisation itself requires more energy – electrifying transport, heat, and industry all push demand up. The answer is to build a system with surplus and resilience: faster grid connections, more firm power, accelerated nuclear deployment, storage that actually scales, domestic gas, and the supply chains the transition needs.
The City exists to finance industry, infrastructure, and corporate Britain. But corporate Britain is being priced out. Every capacity decision that goes elsewhere – data centres, chemicals plants, steel – is a financing London doesn’t arrange and an asset it doesn’t manage. The City’s market is the British economy. When that economy shrinks, so does its market. That’s the price of energy failure. Britain can choose abundance, or it can keep paying for the lack of it.
Alan Chang is CEO & co-founder at Fuse Energy