Does the UK Still Have a Thriving Manufacturing Sector? If Not, Why

Does UK has a thriving and producing Manufacturing any more? If not why is that?

The UK has always loved to produce. Its proud industrial history gave the world brands and products that remain iconic today: Rolls-Royce, Bentley, Jaguar, MG, Austin, and Morris cars; Barbour and Burberry textiles; tartan and fine wool fabrics; high-quality cotton cloth; and even ceramics that were exported globally.

In fact, from the 1800s through to the mid-20th century, the UK was known as the “Workshop of the World.” Its natural resources, access to raw materials, and competitive edge allowed it to dominate steel, iron, shipbuilding, textiles, ceramics, pottery, machinery, optics, and luxury goods industries.

Yet today, manufacturing in the UK accounts for only 8% of GDP, while services dominate at around 80%. Let’s dive down to the numbers. 

The UK Economy Today

The UK economy is a mixed economy, meaning it combines elements of services, manufacturing, and finance. Here’s a breakdown of what it’s mainly comprised of:

1. Services Sector (~80% of GDP)
• Financial services: London is a global financial hub (banks, insurance, investment).
• Professional services: Legal, accounting, consulting, advertising.
• Healthcare & education: Public and private services.
• Retail & hospitality: Tourism, restaurants, and stores.
• Information & communication technology: Software, digital media, telecom.
2. Manufacturing & Industry (~10-15% of GDP)
• Aerospace and automotive industries.
• Pharmaceuticals and chemicals.
• Food and beverage production.
• Machinery and engineering products.
3. Construction (~6% of GDP)
• Residential and commercial building.
• Infrastructure projects.
4. Agriculture (~1% of GDP)
• Mostly cereals, livestock, dairy, and horticulture.
• Very small proportion of overall economy.
5. Energy & Utilities
• Oil and gas extraction in the North Sea.
• Electricity, water, and renewable energy production.
6. Trade & Exports
• Major exports: machinery, vehicles, pharmaceuticals, financial services, and creative industries.
• Imports: consumer goods, electronics, energy products.

So, in short, the UK economy is heavily service-driven, with finance, healthcare, and professional services leading, while manufacturing, construction, and agriculture are smaller contributors.

The Decline of UK Manufactoring since Thatcher’s policies

Since Margaret Thatcher became Prime Minister in 1979, the UK's manufacturing sector has experienced a significant decline as a share of GDP. This trend reflects broader shifts in the economy towards services and structural changes in industrial policy.

📉 Timeline of Manufacturing's Share of UK GDP (1979–2024)

• 1979: Manufacturing accounted for approximately 25% of GDP.
• 1990: Peak at 16.7%.
• 2000: Around 13.5%.
• 2010: Approximately 12%.
• 2017: 9.2%.
• 2024: Fell to 8.0%, marking a historic low. CEIC Data+1Economics HelpCEIC DataReuters

🧭 Key Factors Behind the Decline

• Economic Policy: Thatcher's government emphasized market liberalization and privatization, reducing support for traditional industries.
• Globalization: Increased competition from low-cost manufacturing countries led to offshoring.
• Technological Change: Automation and technological advancements reduced the need for labor-intensive manufacturing.
• Service Sector Growth: The financial services sector, particularly in London, expanded rapidly, attracting investment and talent.
• Brexit: Post-Brexit trade barriers and regulatory changes have further challenged manufacturing exports.

This chart shows the steady decrease in manufacturing's contribution to the UK's GDP over the past few decades.

Despite the decline in GDP share, manufacturing remains vital for the UK economy, contributing significantly to exports and employment. However, challenges such as high energy costs and global competition continue to impact its competitiveness.

Was it just the UK has this decline maybe all countries had their fair share?

Manufacturing share of GDP: UK vs similar advanced economies from 1980 to 2024

• United Kingdom: ~25% → ~8% (2024) ⇒ ▼ ~17 pp. World Bank Open DataTrading Economics
• Germany: ~25–26% → ~17.8% (2024) ⇒ ▼ ~7–8 pp. World Bank Open DataTrading Economics
• France: ~20% → ~9.4% (2024) ⇒ ▼ ~10–11 pp. World Bank Open DataTrading Economics
• United States: ~20% → ~10.0% (2024) ⇒ ▼ ~10 pp. World Bank Open DataTrading Economics
• Japan: ~27–30% → ~20.6% (2023) ⇒ ▼ ~7–9 pp. World Bank Open DataTrading Economics
• Italy: ~22% → ~14.6% (2024) ⇒ ▼ ~7–8 pp. World Bank Open DataTrading Economics

What this shows

• Everyone declined: All these advanced economies saw manufacturing shrink as a share of GDP since 1979/1980. That’s a long-running global pattern as services grew faster. SSTI
• UK’s fall is the steepest among peers, taking it to one of the lowest manufacturing shares in the group today. Germany remains the standout with a high share near 18%. Trading Economics+1
• Context matters: A smaller share doesn’t mean a smaller sector—real manufacturing output often rose over time even as services expanded faster. (The WDI series and U.S. BEA work show this nuance.) Our World in DataNIST Publications

Except UK declined the steepest.  From 25% to 8% in just 40 years.  

The UK’s manufacturing decline did not begin with Thatcher — it started in the 1960s due to global competition, oil shocks, and the shift to services. But Thatcher’s policies accelerated the fall, compressing much of the industrial shakeout into the 1980s. Whereas most advanced economies saw a gradual decline (Germany 25→18%, Japan 30→21%, France 20→9%), the UK’s drop was the steepest (30→8%). Without that acceleration, Britain would likely have stabilised nearer 10–12% of GDP, in line with peers.

Timeline of UK manufactoring secttor

📉 Timeline of Decline by Sector

1960s–1970s

• Textiles & Clothing: Began long decline due to low-cost imports from Asia. Mills in Lancashire, Yorkshire, and Scotland closed.
• Shipbuilding: Still significant in Glasgow, Newcastle, Belfast — but under heavy pressure from Japan and later South Korea.
• Coal Mining: Still large employer, but already past peak (UK coal output peaked 1913). Oil & gas discovery in North Sea began shifting energy away from coal.
• Steel: Nationalised (British Steel, 1967), struggling with overcapacity and lack of investment.

1980s (Thatcher Era)

• Coal Mining: Sharpest collapse after the 1984–85 Miners’ Strike. Pits closed rapidly. Employment fell from >200,000 (1980) to <50,000 (1990s).
• Steel: Major closures, especially in South Wales and North East. British Steel cut capacity, workforce slashed.
• Shipbuilding: Almost wiped out as global competition surged; major yards closed (Clydeside, Tyne, Wear).
• Automotive: British Leyland collapse, job losses. Survived only through later foreign investment (Nissan, Honda, Toyota in 1980s–90s).
• Engineering & Machine Tools: Hit by high pound and cheap imports.

1990s–2000s

• Coal Mining: Effectively ended as an industry — <10,000 miners by 2000.
• Heavy Engineering / Machine Tools: Continued decline, hollowing out supply chains.
• Electronics & Consumer Goods: Many plants (e.g., TV, radio, household appliances) shut or offshored.
• Car Industry: Restructured — decline of UK-owned firms, survival via foreign-owned plants (Nissan Sunderland, BMW MINI, Jaguar Land Rover under Tata).

2010s–Today

• Coal: Almost extinct. Kellingley Colliery (Yorkshire), the last deep coal mine, closed in 2015.
• Steel: Still present (Port Talbot, Scunthorpe), but much reduced — ~25,000 employed vs. 250,000 in 1970s.
• Shipbuilding: Survives only in naval construction (BAE Systems Clyde, Barrow). Commercial shipbuilding gone.
• Textiles: Reduced to niche high-value fashion/technical fabrics.
• Automotive: Still significant but vulnerable to Brexit, global supply chains, and EV transition. UK’s share of global car output fell from 5% (1950s) to <1% today.
• Aerospace: One of the few strongholds (Rolls-Royce engines, Airbus wings in Broughton).
• Pharmaceuticals & Chemicals: Remain globally competitive (AstraZeneca, GSK, Johnson Matthey).
• High-Tech / Advanced Manufacturing: Small but globally relevant (defence, biotech, renewables, robotics).

🧭 Summary by sector decline

• Hardest hit: Coal, Steel, Shipbuilding, Textiles, Machine Tools → largely gone as mass industries.
• Partially rescued/restructured: Cars (survived only under foreign ownership), electronics (largely gone).
• Still strong / adapted: Aerospace, Pharma, Chemicals, Defence, Specialist engineering.

To Get back all these industries this is what UK must. Do now. 

What the UK must do to get back all the lost manufacturing industries (cross-sector, highest ROI)

1. Cut energy/inputs gap

• Long-term power contracts for industry (CFDs for consumers of power, not just generators).
• Fast-track grid connections; cap connection timelines.
• Scale domestic low-carbon power (offshore wind, nuclear, flexible gas w/CCS) to deliver predictable industrial electricity prices.

1. Stable, 10-year industrial strategy

• Lock it in by Act of Parliament: missions (net zero industry, health/biotech, defence/aero, advanced materials), annual scorecards, and cross-party oversight.

1. Patient capital & scale-up finance

• Mandate a UK Industrial Growth Fund (public–private) alongside British Business Bank; pension fund allocations to “productive finance” with clear risk caps.
• Reform R&D tax credits to reward commercialisation, not just lab spend.

1. Skills at scale

• Triple high-quality apprenticeships in engineering/technician roles; levy made flexible for SMEs and supply chains.
• Fast work visas for hard-to-fill roles (toolmakers, welders, power electronics, bioprocess).

1. Planning & permits, measured in weeks

• Nationally Significant Manufacturing Projects route: 6–9 months start-to-finish (land, grid, water).
• Brownfield and port zones with pre-approved EIA baselines.

1. Government procurement as demand anchor

• “Buy to build”: steel in public works, UK-built rolling stock, defence content rules, NHS procurement for UK-made critical meds/devices—consistent with WTO rules (use value-for-money incl. security & carbon).

1. Export & trade facilitation

• Upgrade export finance (UKEF) coverage & speed; embedded trade specialists in top 20 buyer cities.
• Mutual recognition/CE marking fixes in priority sectors; friction-light trusted trader schemes.

1. Cluster strategy

• Fund 10–12 globally competitive clusters (Humber green steel/chemicals, Solent & Clyde ship/aero-naval, Midlands EV/power electronics, North-East batteries, Golden Triangle bio/pharma, South Wales compound semis).
• Co-locate FE colleges, Catapult centres, and anchor firms.

1. Digital & lean diffusion for SMEs

• 50,000 SME “Factory Upgrade Vouchers” (automation, robotics, MES, ERP) tied to productivity KPIs and training.

1. Carbon border & standards

• Introduce a UK carbon border adjustment and product standards (green steel, cement, batteries) so clean UK output isn’t undercut by high-carbon imports.

Sector playbooks (what to do, 0–3–10 year timeline)

Steel (from survival → green leadership)

• 0–12 months: Convert Port Talbot/Scunthorpe plans to dual-track: EAF + near-term DRI pilots with hydrogen/CCS; 10-yr power price contracts; procurement rule: % UK/low-carbon steel in public projects.
• 1–3 years: Build DRI/H₂ supply (with ammonia import bridge); scrap logistics upgrade; certify “UK Green Steel”.
• 3–10 years: Export premium green steel; integrate with automotive/aero supply chains.

Shipbuilding (commercial niches + naval backbone)

• 0–12 months: Multi-year, rolling MoD pipeline (frigates, support ships) with content floors; UK Export Finance for workboats/offshore wind vessels.
• 1–3 years: Specialise in offshore wind installation/maintenance ships and autonomous surface vessels; cluster R&D with universities.
• 3–10 years: Become Europe’s hub for low-emission maritime (methanol/ammonia propulsion, retrofits).

Automotive (EVs, power electronics, software)

• 0–12 months: Secure 2–3 gigafactories; upgrade rules of origin pathways; grants tied to inverter/motor supply chains.
• 1–3 years: Scale Tier-1/2 suppliers (stamping, castings, PCBs, battery materials); UK spec for public charging hardware made locally.
• 3–10 years: Lead in power electronics & drivetrains and software-defined vehicles; export modules to EU/US.

Textiles (from volume to value)

• 0–12 months: Support reshoring for technical textiles (medical, defence, composites); brand “Made Green in UK” with traceability.
• 1–3 years: Automation grants for cutting/sewing; circularity mandates (recycling, fibre-to-fibre pilots).
• 3–10 years: Niche global export leader in performance fabrics and fashion-tech.

Machine tools & advanced manufacturing equipment

• 0–12 months: 100% first-year capital allowances for CNC/robotics/AM (additive manufacturing).
• 1–3 years: Catapult-led demonstrators for precision machining, metrology, and 3D-printed metals; apprenticeships for toolmakers.
• 3–10 years: Export UK-branded precision systems into aero/medtech/space.

Electronics & semiconductors (compound semis edge)

• 0–12 months: Double down on compound semiconductors (GaN, SiC) in South Wales/North-East; targeted grants for packaging/test.
• 1–3 years: Secure anchor demand (EV inverters, chargers, defence radar); trusted-foundry initiatives.
• 3–10 years: UK as Europe’s hub for power & RF devices and advanced packaging.

Pharmaceuticals & biotech (scale and resilience)

• 0–12 months: Fast-track MHRA approvals for high-need drugs/devices; long-term NHS purchase agreements for UK-made critical medicines.
• 1–3 years: Expand bioprocessing capacity; GMP workforce pipeline; shared fill-finish facilities.
• 3–10 years: Lead in cell/gene therapy manufacturing; export-oriented clinical-to-commercial corridor.

Aerospace & defence (keep the crown)

• 0–12 months: Secure Rolls-Royce/airframe supply chains; export credit for aero MRO growth; green aviation R&D (SAF, hydrogen).
• 1–3 years: Scale wing/composite centres; dual-use tech spin-outs.
• 3–10 years: Net-zero aircraft components and advanced engines leadership.

Coal is not a revival target (net-zero economics & technology path). Focus instead on skills transition for ex-coal regions into steel, chemicals, offshore wind, grid construction, and defence manufacturing.

Execution mechanics (how to make it real)

• Industrial Deals: Co-investment with anchor firms; public money only against milestones (capacity, jobs, emissions).
• One-Stop “Build Team”: Dedicated Whitehall–Devolved taskforce that handles land/grid/water/permits for strategic plants.
• Funding mix:
• Core CAPEX grants (20–30%) for strategic assets.
• Tax tools (full expensing; enhanced credits for automation, power electronics, bioprocess).
• UKEF/export insurance for order books.
• KPIs (publish annually):
• Manufacturing share of GDP (target: 8% → 12% in 10 years).
• GVA per worker (+3–4% p.a. in priority clusters).
• Energy cost gap vs. DE/FR (close within 10%).
• Export growth in green steel, power electronics, biopharma.

Fast wins in 12 months

1. Lock in 2 gigafactory deals + one green-steel DRI/EAF decision.
2. Legislate 10-year industrial strategy and procurement rules.
3. Launch 50k “Factory Upgrade” vouchers for SME digital/automation.
4. Publish a grid-connection fast lane for industrial clusters.
5. Announce carbon-border/green-standards roadmap.

practical route to 12% of GDP in manufacturing—from ~8% today.

The hard math (sets ambition)

• Moving from 8% → 12% means lifting manufacturing’s weight by 50% relative to the rest of the economy.
• If the non-manufacturing economy grows ~1.5% real per year, manufacturing would need about ~6% real CAGR for 10 years (or ~4.6% over 15 years). That’s ambitious but doable with a focused plan and big projects.

Five cross-economy levers (do these first)

1. Energy price parity with Germany/France
   Long-term industrial power contracts, grid fast-track, and rapid build-out of low-carbon generation so large plants can secure predictable sub-€70/MWh equivalents.
2. 10-year industrial strategy in law
   Cross-party missions (clean industry, autos & power electronics, life sciences, defence/aero, compounds & advanced materials) with annual scorecards.
3. Patient capital at scale
   A UK Industrial Growth Fund co-investing with pensions into strategic plants; full expensing made permanent for automation/robotics/CNC/AM.
4. Skills surge
   Triple high-quality technical apprenticeships; visa fast-lane for toolmakers, welders, power-electronics and bioprocess skills.
5. Demand anchors
   Procurement rules (steel, rolling stock, defence, NHS critical meds), Carbon Border Adjustment, and “green product” standards to reward clean UK output.

Sector playbooks (projects that move the needle)

1) Green steel & heavy industry (▲ ~0.4–0.6 pp of GDP over 10–15y)

• Convert blast furnaces to EAF + DRI (H₂/CCS), secure 10-yr power contracts, and mandate low-carbon steel content in public works.
• Build a UK certification for Green Steel tied into autos, construction and defence.

2) Automotive supply chain 2.0 (EV era) (▲ ~0.6–0.8 pp)

• Land 2–3 gigafactories plus upstream (cathode/anode) and downstream (packs, BMS) capacity.
• Double down on power electronics, motors, inverters (UK edge) and PCB/EMS capacity; align rules of origin; bake UK hardware into public charging rollouts.

3) Aerospace & defence manufacturing (▲ ~0.3–0.4 pp)

• Secure aero engines, wings, composites; expand MRO; fund green aviation (SAF, hydrogen components).
• Multi-year naval pipeline (frigates, support ships) + offshore wind vessels; export finance for commercial yards.

4) Life sciences & bioprocessing (▲ ~0.3–0.5 pp)

• Fast-track MHRA for critical drugs/devices; long-term NHS offtake for UK-made meds.
• Expand biomanufacturing (cell/gene therapy, vaccines) with shared GMP and fill-finish hubs.

5) Compound semiconductors & advanced electronics (▲ ~0.2–0.3 pp)

• Make the UK Europe’s hub for GaN/SiC devices and advanced packaging/test.
• Anchor demand via EV inverters, grid hardware, RF/defence, power supplies for data centres.

6) Clean-tech manufacturing (▲ ~0.2–0.4 pp)

• Scale domestic production of wind components, grid kit (transformers, switchgear), heat pumps, electrolyzers.
• Link product standards to UK content & low-carbon intensity.

(The point lifts are indicative; together they add ~2–3 pp to GDP over 10–15 years if executed at scale.)

Where to build it (cluster map)

• Humber/Teesside/South Wales: green steel, chemicals, CCUS.
• Midlands/North-East: EVs, batteries, power electronics, robotics.
• Golden Triangle & North-West: biopharma, med-tech.
• Clyde/Solent/Barrow: naval & marine, offshore vessels.
• South Wales/North-East: compound semis & packaging.

Policy instruments (make investment decisions easy)

• Capex: 20–30% co-investment for strategic plants, milestone-based.
• Opex: discounted power via contracts; relief on network charges for anchor sites.
• Tax: permanent full expensing; enhanced credits for automation, power electronics, bioprocess.
• Permits: “Strategic Manufacturing” fast lane—single portal, statutory time limits.
• Trade: friction-light trusted trader schemes; CE/UKCA mutual recognition in priority sectors; muscular UKEF.

Milestones (so you know it’s working)

In 12 months

• 2 gigafactory FIDs + 1 DRI/EAF steel FID + 1 compound-semi packaging FID.
• Industrial strategy bill passed; procurement & carbon-border rules published.
• 50k “Factory Upgrade” vouchers live (automation/ERP/MES/robots).

In 3 years

• First gigafactory online; EAF commissioning; bioprocessing capacity doubled; two wind-vessel orders built in UK yards.

In 10 years

• Manufacturing ≥10% of GDP on a clear glidepath to 12%; productivity +35–40% vs. today; energy cost gap with DE/FR closed to <10%.

Can UK bump up its manufacturing from 8% to 12% in 10 years? 

Short answer: yes, it’s feasible—but only with a focused, decade-long push. Getting from ~8% to 10–12% of GDPmeans lifting manufacturing’s weight by ~25–50% relative to the rest of the economy. If the wider economy grows ~1.5% real, manufacturing needs roughly 4–6% real CAGR for 10–15 years. That’s tough but doable if the UK lands a handful of big projects and fixes systemic bottlenecks.

What to do (cross-economy levers)

1. Close the energy cost gap

• 10-year fixed-price industrial power contracts; fast-track grid connections.
• Scale reliable low-carbon generation (offshore wind, nuclear, flexible gas/CCS) to guarantee predictable prices for large users.

1. Put a 10-year industrial strategy in law

• Cross-party missions (clean industry; autos & power electronics; life sciences; aerospace/defence; compounds & advanced materials).
• Annual scorecards, independent oversight, and milestone-based funding.

1. Mobilise patient capital

• A UK Industrial Growth Fund co-investing with pensions for strategic plants.
• Permanent full expensing; enhanced credits for automation/robotics/CNC/additive.
• R&D credits that reward commercialisation, not just lab spend.

1. Skills at scale

• Triple high-quality technical apprenticeships; portable micro-credentials.
• Fast visa lanes for hard-to-hire roles (toolmakers, welders, power-electronics, bioprocess).

1. Use procurement to anchor demand

• Low-carbon UK steel in public works; multi-year orders for rolling stock and naval vessels.
• NHS long-term offtake for UK-made critical medicines & devices.
• Introduce carbon border adjustment and product standards (green steel, cement, batteries).

1. Planning that works for factories

• “Strategic Manufacturing” fast lane: single portal, statutory timelines, pre-zoned sites at ports/brownfields with grid/water pre-cleared.

1. Trade & regulation that reduce friction

• Mutual recognition (CE/UKCA) in priority sectors; trusted-trader schemes.
• Scale UK Export Finance; embed specialists in top buyer markets.

1. Digitise the long tail (SMEs)

• 50k annual “Factory Upgrade” vouchers for robots, MES/ERP, vision, QC—tied to productivity KPIs and workforce training.

Where the growth can come from (big projects that move GDP)

• Green steel & heavy industry: Convert blast furnaces to EAF/DRI (H₂/CCS); certify “UK Green Steel” and lock it into construction/auto/defence supply chains.
• Automotive (EV era): Land 2–3 gigafactories plus motors, inverters, power electronics, packs, and PCB capacity; align rules of origin; localise public-charging hardware.
• Aerospace & defence: Expand engines, wings, composites; naval pipeline + offshore wind vessels; grow MRO exports.
• Life sciences & bioprocessing: Fast-track MHRA, NHS offtake, expand GMP biomanufacturing (vaccines, cell/gene therapy, fill-finish hubs).
• Compound semiconductors & advanced electronics: Make the UK Europe’s hub for GaN/SiC devices and advanced packaging/test; anchor demand via EVs, grid, defence, data-centre power.
• Clean-tech hardware: Heat pumps, electrolyzers, grid transformers/switchgear, wind components—tied to standards that value low-carbon domestic content.

Execution mechanics (so it actually happens)

• Deals, not slogans: Co-investment with anchor firms; public money released only on FIDs and build milestones.
• One-stop “Build Team”: Whitehall + devolved joint unit that shepherds strategic plants through land/grid/water/permits.
• Clusters: Fund 10–12 sites (Humber/Teesside/South Wales for green industry; Midlands/North-East for EVs & power electronics; South Wales/North-East for compound semis; Golden Triangle/North-West for biopharma; Clyde/Solent/Barrow for naval & marine).

Feasibility & timeline (what “good” looks like)

12 months (fast wins)

• Final Investment Decisions: 2 gigafactories, 1 green-steel DRI/EAF, 1 compound-semi packaging plant.
• Industrial Strategy Bill passed; procurement/CBAM rules published.
• 50k SME factory-upgrade vouchers live; grid fast-lane launched for clusters.

3 years

• First gigafactory online; EAF commissioning; bioprocess capacity doubled; UK-built offshore wind vessels delivered.
• Manufacturing share on track to ≥9–10%.

10–15 years

• Multiple gigafactories + full EV supply chain; premium green-steel exports; leadership in GaN/SiC and bioprocessing.
• Manufacturing at 10–12% of GDP, with productivity up 35–40% vs. today.

Risks (and how to manage them)

• Policy flip-flop → lock strategy in legislation; independent oversight.
• Energy price spikes → hedge with long-term contracts; diversify generation mix.
• Skills shortage → expand apprenticeships + targeted visas; employer-led curricula.
• Supply-chain shocks → domestic redundancy (e.g., packaging/test in semis); UKEF to secure export orderbooks.
• State-aid misfires → milestone-based funding; clawbacks; crowd-in private capital.

Bottom line: Getting to 10–12% is feasible if the UK lands a small set of large, visible projects (steel, batteries, semis, bioprocess, aero/defence), fixes energy and planning, and scales automation across SMEs—then stays the course for a decade.

Does UK need cheap energy?

• cheap, reliable energy is one of the biggest levers for raising manufacturing’s share of GDP

cheap, reliable energy is one of the biggest levers for raising manufacturing’s share of GDP

1. Energy is a core input in industry

• Heavy sectors like steel, chemicals, cement, glass, aluminium, paper can see 20–40% of their total costs tied directly to electricity and gas.
• In lighter advanced manufacturing (electronics, machinery, pharma), energy is smaller (5–10%), but stable pricing still matters for competitiveness and investment certainty.

2. International comparisons

• US manufacturing revival (2010s): Cheap shale gas and electricity gave US chemical, plastics, and metals a cost edge. Energy-intensive manufacturing reshored because US industrial power prices were 30–50% below Europe’s.
• Germany: Traditionally had high energy costs, but its industry thrived because of stability, long-term contracts, and efficient co-generation. Post-2022 gas crisis, German industry shrank as energy-intensive plants shut down.
• China: Kept industrial power costs low with state-subsidised coal & hydro; this made it globally dominant in aluminium, steel, solar panels, and EV batteries.
• France: Relatively cheap nuclear power kept electricity costs lower and more predictable than Germany’s, helping its chemicals and aluminium sectors.

3. Cheap energy influences investment location

Multinational firms deciding where to site a factory compare:

• Unit labour cost
• Energy cost & reliability
• Logistics & infrastructure
• Regulatory risk

If energy is expensive/volatile (UK, post-2021), manufacturers are reluctant to build capital-intensive plants like gigafactories, hydrogen DRI steel, or semiconductor fabs.

4. GDP share impact

Manufacturing’s GDP share can rise if:

• Energy-intensive sectors reopen/expand (steel, chemicals, glass).
• New clean-tech industries (EV batteries, electrolyzers, hydrogen, data-centre components) cluster where low-cost renewable/nuclear energy is guaranteed.
• Stable energy pricing makes exports more competitive.

If energy is expensive, manufacturing’s share tends to shrink as:

• Plants relocate abroad.
• Imports replace local production.
• Manufacturing’s output stagnates while services grow.

✅ So yes: To push UK manufacturing from ~8% to 10–12% of GDP, cheap and predictable energy is almost a prerequisite—alongside automation, skills, and capital.
Without it, any industrial strategy will struggle, especially in energy-hungry sectors (steel, glass, ceramics, batteries, chemicals).

we can estimate this using energy-intensive sectors’ contribution to manufacturing GDP and how much cost reductions could translate into higher output. Here’s a reasoned approach:

How UK can get cheap Energy?

1️⃣ Baseline: UK manufacturing today

• Manufacturing share: ~8% of GDP.
• Breakdown of major energy-intensive sectors (approximate shares of total UK manufacturing output):

Sector	% of manufacturing output	Energy intensity
Steel / metals	10–12%	Very high
Chemicals / petrochemicals	10–12%	High
Glass / ceramics / cement	3–5%	Very high
Paper & pulp	2–3%	High
Other manufacturing	70%	Low–medium

• Roughly 25–30% of UK manufacturing is energy-intensive.

2️⃣ Potential impact of cheap/stable energy

• Studies (IEA, OECD, US Energy Information) show a 20–30% reduction in energy costs for energy-intensive industries can raise output by 10–20% if other factors (skills, capital, demand) are available.
• For UK, assume:
• Energy-intensive manufacturing = 25% of total manufacturing output
• Energy cost cut = 30%
• Output boost = 15% of that 25% share = 3.75% increase in energy-intensive sectors’ contribution.
• Translating to GDP share:
• Current manufacturing = 8% of GDP
• Energy-intensive output could increase ~0.0375 × 8% ≈ 0.3 pp of GDP directly
• Indirect multiplier (supply chains, exports, domestic demand) = ~2–3×
• Total effect: ~0.6–0.9 pp of GDP increase

3️⃣ Sectoral example

• Steel: If Port Talbot & Scunthorpe operate at full capacity with cheap electricity/hydrogen:
• Output could rise 15–20%
• Manufacturing GDP contribution: +0.1–0.2 pp
• Chemicals & petrochemicals: With stable power/gas prices:
• Could expand exports, replace imports
• Contribution: +0.2–0.3 pp
• Glass / cement / ceramics: Niche expansion: +0.05–0.1 pp

4️⃣ Bottom line

Scenario	Manufacturing share impact
Energy cost status quo	~8% of GDP
Cheap & predictable energy for energy-intensive sectors	+0.6–0.9 pp → 8.6–8.9%
Combined with industrial strategy, skills, capital	Could reach 10–12% over 10–15 years

✅ Conclusion: Cheap, stable energy alone can add ~0.6–0.9 pp to manufacturing’s GDP share. It’s not enough to get to 12% by itself, but it’s a necessary enabler. Combine it with industrial clusters, skills, finance, and demand anchoring, and the 10–12% target becomes feasible.

The UK—you know, the land that ignited the Industrial Revolution. It gave the world highly sought-after goods such as ceramics and watches. This land always has a way of surprising you

How to achieve cheap energy in the UK:

How UK can get cheap Energy?

Getting cheap, reliable energy in the UK is absolutely central if you want to revive manufacturing. Here’s a practical breakdown of how the UK could achieve that:

One of the most critical levers for reviving UK manufacturing is cheap, reliable, and predictable energy. Energy-intensive industries like steel, chemicals, cement, glass, and batteries can see 20–40% of their total costs tied directly to electricity and gas. Even advanced manufacturing sectors—electronics, machinery, and pharmaceuticals—benefit significantly from stable energy pricing, which attracts investment and supports competitiveness. Here’s a practical roadmap for achieving low-cost energy in the UK:

Cheap, reliable energy is essential for reviving UK manufacturing. Energy-intensive sectors like steel, chemicals, cement, and batteries can spend 20–40% of costs on electricity and gas. Even advanced manufacturing benefits from stable prices, which attract investment and boost competitiveness. Here’s how the UK can achieve it:

1️⃣ Expand low-cost domestic generation

Option	Status & Potential	Notes
Offshore wind	UK is world leader; cost falling to £40–50/MWh	Scale turbines + long-term PPAs for industry
Onshore wind & solar	Limited onshore wind; solar cheaper	Planning reforms + grid access needed
Nuclear	New builds: Sizewell C, small modular reactors	High upfront, low long-term marginal cost; 60-year plants reduce industrial electricity cost
Hydro / pumped storage	Minor role	Good for peak balancing
Natural gas (flexible plants)	UK North Sea / LNG imports	Use as backup; tie to CCS for decarbonisation
Hydrogen / H₂-ready plants	Emerging	Can replace natural gas in steel/chemicals; long-term cost ~£30–50/MWh equivalent

Key insight: long-term fixed contracts from low-marginal-cost generators can provide predictable industrial electricity at 40–60% of current wholesale UK prices.

2️⃣ Improve grid & connection access

• Industrial clusters (Humber, Teesside, Midlands, North-East, South Wales) need fast-track grid connections.
• Long waiting times (3–7 years) for large-scale connections are a major cost barrier.
• Pre-approve land, environmental permits, and grid access so new factories can come online quickly.

3️⃣ Industrial power contracts

• Long-term 10–15 year contracts for industrial users at fixed or indexed rates.
• Could include:
• Price floors/ceilings to mitigate volatility
• Bundled renewable power (offshore wind, nuclear)
• Conditional on energy efficiency improvements or electrification of heat

Example: Germany uses 10–15 year PPAs for EAF steel & chemicals; US shale-era chemical plants signed multi-decade power contracts at 40–50% of EU prices.

4️⃣ Decentralised & on-site generation

• Combined Heat & Power (CHP) for chemicals, steel, and pharma.
• On-site solar, batteries, or hydrogen fuel cells for backup.
• Reduces reliance on volatile grid prices, smooths demand charges.

5️⃣ Policy tools to lower industrial energy cost

1. Carbon contracts for difference (CCfDs): stabilize cost of low-carbon steel, cement, and hydrogen.
2. Network charges reform: exempt or reduce grid connection & transmission fees for heavy industrial users.
3. Targeted subsidies / tax reliefs: for CHP, energy efficiency, electrolyzers, and renewable self-generation.

6️⃣ Diversify energy sources

• Avoid reliance on one source (gas, imported LNG) → keeps prices competitive.
• Mix of nuclear + offshore wind + gas + hydrogen + storage can reduce volatility by spreading generation risk.

By combining low-cost generation, long-term contracts, faster grid access, and supportive policies, UK industrial electricity prices could fall to £40–50/MWh—comparable to Germany and France. This would directly boost manufacturing competitiveness and help raise its share of GDP from ~8% to 10–12% over the next decade.

✅ Bottom line

Cheap energy comes from a combination of:

1. Low-marginal-cost generation (offshore wind, nuclear, solar, hydro).
2. Long-term, fixed industrial contracts for electricity.
3. Fast, guaranteed grid access for factories.
4. Decentralised and on-site generation where possible.
5. Policy reforms (network charges, CCfDs, tax reliefs) to reduce cost volatility.

With this approach, UK industrial electricity prices could realistically fall to £40–50/MWh equivalent, similar to Germany/France, which would directly boost competitiveness and help manufacturing’s GDP share climb.

Conclusion

The UK’s manufacturing sector, once the pride of the industrial world, has been dramatically reduced over the past 40 years—from 25% of GDP in 1979 to just 8% today. While some industries like aerospace, pharmaceuticals, and advanced engineering remain globally competitive, traditional heavy industries such as steel, coal, shipbuilding, and textiles have largely disappeared.

Restoring the UK’s manufacturing glory is possible, but it requires a coordinated, long-term strategy. Key factors include affordable and reliable energy, stable industrial policy, skills development, patient capital, streamlined planning, and a focus on high-value, high-tech sectors. By targeting both fast wins and decade-long structural reforms, the UK could increase manufacturing’s share of GDP to 10–12%, strengthen supply chains, and secure jobs while building globally competitive industrial clusters.

Ultimately, the UK can revive its industrial strength—but only if government, industry, and finance work together with clear goals, consistent policy, and investment in innovation. Without such a concerted effort, manufacturing will likely remain a smaller, niche contributor to the economy, overshadowed by services.