Three chemical plants in Hull are being mothballed by INEOS, highlighting the growing pressure facing energy-intensive manufacturers in the UK as European energy costs remain well above those of major international competitors.

INEOS announced on 22 September that it was suspending operations at its three chemical plants at Saltend in Hull. Two had already stopped production, with the third expected to come offline within days. The facilities support almost 4,000 jobs and produce chemicals used in pharmaceuticals, clothing, cosmetics, detergents, construction materials and other industries.

The company said the decision was driven by high European gas prices, which have made production increasingly difficult to compete with against manufacturers in the United States and China.

Gas is particularly important to the Hull operations because it is used both to power the facilities and as a raw material in the manufacturing process. INEOS said European gas prices had reached around 12 times US levels, while gas-based production in Europe was also significantly more expensive than coal-based production in China.

The situation illustrates a wider challenge for UK manufacturing. Energy-intensive industries such as chemicals, steel, glass and ceramics are particularly exposed to wholesale energy prices because energy represents a significant part of their production costs.

For manufacturers, the issue goes beyond the cost of keeping factories running. Chemical products made at Hull feed into other industries, meaning reduced domestic production can affect supply chains further down the line. Businesses that rely on these materials may have to source them from overseas, potentially increasing transport, procurement and supply-chain costs.

The decision also comes after several years of pressure on European industrial competitiveness. Manufacturers have faced higher energy costs since the energy crisis triggered by Russia's invasion of Ukraine, while the Middle East conflict has added further uncertainty to global energy markets.

INEOS says the Hull facilities are among the most efficient of their kind and that the plants have benefited from significant investment. The company has described the suspension as being until further notice, rather than announcing permanent closures.

That distinction will matter for workers and businesses in the region. If production eventually resumes, the plants could continue supporting a large industrial supply chain. If the suspension becomes permanent, however, the consequences would extend beyond the immediate workforce to suppliers, contractors and other businesses connected to the site.

For founders and investors, the story is a reminder that energy is a strategic business cost, particularly for companies operating in manufacturing and physical industries. Access to affordable power can influence where factories are built, whether production remains in the UK and how competitive British businesses can be internationally.

The bigger question is whether the UK can keep energy-intensive manufacturing competitive while businesses face higher costs across the wider economy.

How important is energy cost when deciding where to manufacture or expand a business?

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