UK food industry energy crisis: trends and solutions

Published on 19 May 2026

The UK food industry is currently navigating a perfect storm of escalating energy costs, posing a significant threat to every stage of the supply chain, from farm to fork. Many UK food businesses are grappling with two fundamental questions: how did this situation arise, and what practical steps can be taken to address it? This challenge extends beyond mere cost-cutting; it concerns safeguarding the nation's food supply and ensuring economic stability.

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The UK food industry's energy crisis unpacked

Rising energy costs: a critical challenge for food manufacturing

The UK food and drink manufacturing sector is a vital part of the economy, contributing £37 billion and employing nearly half a million people across the country1. It stands as the UK's largest manufacturing industry, accounting for almost a quarter of total manufacturing turnover. However, this crucial sector is highly susceptible to energy cost fluctuations. During the 2022 gas price spike, the Food and Drink Federation reported that many companies were facing energy bill increases of 400-500%, and although wholesale prices have since eased, energy remains an outsized share of operating costs for energy-intensive food manufacturers. These escalating energy prices directly translate into higher production costs for food manufacturers. This pressure is then passed down the supply chain, ultimately affecting consumer prices and the availability of goods on supermarket shelves. The Food and Drink Federation (FDF) has indicated that businesses have reached their limit for absorbing these inflationary pressures, having already implemented cost reductions and limited product ranges.

The link between energy prices and UK food insecurity

The ripple effect of high energy prices extends far beyond business balance sheets, posing a significant threat to UK food security. The House of Commons Environment, Food and Rural Affairs (EFRA) Committee has examined how renewed Middle East conflict could trigger a fresh inflation wave that puts UK food security at risk4. Food prices have been rising since late 2021. Food and non-alcoholic drink inflation peaked at 19.1% in the 12 months to March 2023, the fastest pace in more than 40 years according to the ONS3. While inflation has since eased, the cumulative effect means households continue to face a much higher cost of living. In January 2025, around 14% of UK households — an estimated 7.3 million adults — were classified as 'food insecure'2, meaning they had to eat less, skip meals or go a full day without eating due to lack of access or affordability. This stark reality highlights the urgent need for intervention to prevent further inflationary pressures and protect the nation's food supply.

Understanding the drivers of high energy costs

Global market dynamics and the energy price shock

Recent geopolitical events, such as the conflict in the Middle East, have sent shockwaves through global energy markets, driving up oil and gas prices. This volatility quickly translates into higher costs for the UK food industry, which relies heavily on energy at every stage, from production and transport to storage. For instance, higher oil and gas prices directly impact fertiliser production, transport, and on-farm fuel costs, leading to increased input bills for farmers. This global energy price shock exposes fragilities in the food and drink supply chain, particularly for energy-intensive sectors and small and medium-sized enterprises (SMEs).

Why UK industrial energy prices remain elevated

Even beyond global market volatility, UK industrial energy prices are often higher than those in some EU countries, creating a competitive disadvantage for British businesses. Small businesses in the UK can pay around 30-40% more per kilowatt-hour than their EU counterparts. This disparity is attributed to several factors, including the UK's gas-dependent power system, high network and policy costs embedded in electricity bills, and an aging electricity grid requiring significant investment. These structural issues mean that even as wholesale prices fluctuate, the underlying costs for UK businesses remain elevated, hampering competitiveness and investment.

Immediate strategies for food businesses

Optimising energy consumption and efficiency

While systemic change is necessary, food businesses can implement immediate strategies to manage energy costs. This includes assessing current energy consumption patterns to identify key cost drivers and implementing energy efficiency improvements. Measures such as upgrading to low-energy heating and lighting systems, improving insulation, and investing in energy-efficient equipment can significantly reduce operational expenses. Smart energy management solutions can also play a role in optimising usage.

Navigating energy procurement and contracts

Understanding energy market trends and forecasts is crucial for informing long-term procurement strategies. Businesses should carefully investigate and compare energy contracts to secure the most favourable terms. While the focus is often on reducing consumption, effective procurement can also mitigate the impact of price volatility.

Government policy and industry advocacy

Current UK government food policy and support schemes

The onus is increasingly on the UK government to shield the food industry from energy price shocks. The Department for Energy Security and Net Zero (DESNZ) is responsible for ensuring energy security, protecting billpayers, and supporting economic growth5. The government offers various grants and schemes to help businesses manage energy costs and transition to greener operations6. These include the Industrial Energy Transformation Fund (IETF) for energy-intensive industries, the Boiler Upgrade Scheme (BUS) which now extends to eligible commercial properties, and Enhanced Capital Allowances (ECAs) for investments in energy-saving equipment. Local councils also provide bespoke funding programmes for energy-efficient refurbishments and smart energy management systems.

The role of house of commons committees in addressing the crisis

House of Commons committees play a vital role in scrutinising government policy and identifying risks to the nation. This parliamentary scrutiny provides a platform for industry experts and charities to highlight the challenges faced by the food sector and advocate for policy changes to ensure resilience and fairness. The Environment, Food and Rural Affairs (EFRA) Committee, for example, has been examining the impact of geopolitical tensions on UK food supply chains and food security. These committees provide a platform for industry experts and charities to highlight the challenges faced by the food sector and advocate for policy changes to ensure resilience and fairness.

Reimagining energy for the food sector: a future of abundance

Beyond scarcity: enabling growth with cheap, clean energy

The prevailing narrative around energy often focuses on scarcity and conservation. However, a truly resilient and thriving food industry requires a shift in perspective: permission to want more energy, not less. Imagine a future where energy is so abundant, cheap, and clean that it ceases to be a constraint on ambition or a driver of food insecurity. This vision challenges the idea that businesses must constantly manage scarcity, instead enabling innovation and expansion without the constant threat of prohibitive energy costs. With energy no longer a crippling expense, the food sector could invest more in advanced manufacturing, sustainable practices, and expanding production to meet national demand.

Building the infrastructure for a resilient food supply chain

Achieving this future requires rebuilding the energy system from scratch. Fuse Energy is committed to delivering terawatt-hours of the cheapest, cleanest energy possible, fundamentally transforming the energy landscape. By vertically integrating and rebuilding the energy system, Fuse aims to address the root causes of high industrial energy prices in the UK. This foundational infrastructure will create a future where energy is invisible - cheap, abundant, and clean - removing energy costs as a barrier to business success and national food security. This approach offers a systemic solution, allowing the food industry to innovate and grow, fostering greater productivity and ensuring a secure food supply for all.

Conclusion: securing the future of UK food

The UK food industry stands at a critical juncture, grappling with elevated energy prices that threaten its stability and the nation's food security. While immediate efficiency measures and government support schemes offer some relief, the long-term solution lies in a fundamental transformation of our energy system. By moving beyond a scarcity mindset and embracing a future of abundant, cheap, and clean energy, the UK food sector can unlock unprecedented growth, innovation, and resilience. This vision, championed by companies like Fuse Energy, promises a future where energy is no longer a constraint, but a catalyst for a thriving and secure food supply chain.

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References

1. Food and Drink Federation. UK food and drink manufacturers urge government to support industry's growth ambitions, as new report reveals sector's £37bn contribution.
2. Food Foundation. Latest food insecurity tracker shows seven million adults going hungry.
3. UK Government. Food and energy price inflation, UK: 2023.
4. Farming UK. MPs to probe Iran conflict impact on UK food prices and supply.
5. UK Government. Department for Energy Security and Net Zero.
6. Vital Direct. Energy Efficiency Grants and Incentives for UK Businesses in 2025.