Priced Out of Prosperity: Why Industry Is Leaving Britain Behind

Why Britain Is Losing the Race for Industrial Investment

Despite government assurances about “Global Britain” and ambitions to become a world-leading hub for innovation and industry, the economic reality tells a different story. A closer look at key industrial costs across a range of countries shows that the United Kingdom has become one of the least attractive places in the developed world to launch or scale industrial ventures.

This article compares six core business costs across the UK, Europe, and the US, highlighting just how far Britain has drifted from being a competitive location for industry.

1. Industrial Rent: The Most Expensive in Europe

At £150 per square metre per year, the UK has the highest industrial rent in the dataset, almost double the European average. For comparison:

• Romania: £40

• Poland: £52.5

• Spain: £65

Manufacturers looking to establish or expand production facilities naturally gravitate towards countries where land and warehouse costs are affordable. In contrast, the UK’s inflated property market places an unnecessary burden on businesses from the outset. In the Article “The Land of The Few” I discuss how property prices and land value have served to parallel the decline in industry to the current housing crisis.

2. Labour Costs: High Without the Productivity

With an average labour cost of £27.50 per hour, the UK sits somewhere in the middle of the pack. While countries like Germany (£42) and France (£40) pay more, their workforce productivity and infrastructure offset these costs.

By contrast, the UK suffers from:

• Lower vocational training and STEM uptake

• Shortages in engineering and manufacturing talent

• Productivity levels that have stagnated since 2008

Meanwhile, countries like Poland (£10/hour) and Romania (£11/hour) offer extremely competitive rates with growing skill bases, making them more attractive for labour-intensive industries.

3. Trade Difficulty: Post-Brexit Friction is Real

Trade friction has become a defining barrier to investment in the UK since leaving the EU. The UK’s trade difficulty score sits at 16, compared to:

• Germany: 11

• France: 11

• Netherlands: 6 (the easiest in this comparison)

New customs declarations, product standards divergence, and cross-border delays all contribute to a costlier, slower, and less predictable trading environment. For businesses that rely on fast-moving supply chains, this is a deal-breaker.

4. Utility Costs: Energy Not Cheap Enough

Energy is a vital consideration for industrial operations. The UK’s electricity price of £15 per 100kWh is middling, but not competitive when measured against:

• Finland: £8

• USA: £12

• Romania: £12

For heavy industry and data-intensive operations like server farms and manufacturing, lower electricity prices are often the deciding factor in location decisions. The UK loses out here too.

5. Corporation Tax: Not Unreasonable, But Not a Hook

The UK’s corporation tax rate of 25% is lower than Germany’s (29.9%) or Portugal’s (30.5%), but it falls far short of the lowest rates:

• Ireland: 12.5%

• Romania: 16%

• Poland: 19%

Corporation tax alone does not drive investment, but when paired with other burdens, the UK’s relative lack of tax incentives becomes glaring.

6. VAT and Regulation: Neutral Impact

With a VAT rate of 20%, the UK aligns with much of Europe. While not particularly punitive, it’s not an area where Britain gains any competitive edge either.

More concerning is the regulatory uncertainty. Ongoing divergence from EU standards creates confusion and extra compliance costs for companies trading across borders.

Conclusion: The UK Has a Cost and Confidence Problem

When considering where to locate an industrial facility, companies look at the total cost of doing business, including rent, labour, energy, taxes, and trade access. On nearly every metric:

• The UK is more expensive

• The regulatory environment is more uncertain

• The trade environment is more hostile

This is not a model that invites confidence or investment.

What Needs to Change?

If the UK hopes to compete again for industrial investment, it must address the following:

1. Lower business premises costs by incentivising industrial development zones.

2. Invest in workforce training and reverse the trend of declining productivity.

3. Resolve post-Brexit trade inefficiencies by aligning regulatory standards and digitising border procedures.

4. Reduce energy costs through infrastructure investment and renewable subsidies.

5. Offer targeted tax incentives for sectors the UK wants to lead in (e.g. green manufacturing, biotech).

Final Thought

The UK is not just expensive, it’s uncertain. Without decisive, reforms, Britain will continue to lose out to neighbours who offer lower costs, fewer trade barriers, and greater investor confidence.

Whilst this article does not explore the technological impacts on economic trends that might otherwise
influence the choices businesses make when choosing their location, you might enjoy my article titled “Smart Data, Unfair Outcomes“