Chancellor George Osborne has been urged by manufacturing leaders to act on rising energy costs or risk future investment as the economy starts to pick up.

EEF, the manufacturing trade body, wants the Chancellor to use his Autumn Statement next month to tackle energy bills which, it says, are increasing faster than for competitors abroad and squeezing company margins.

Andy Tuscher, EEF director (North), said: “The Chancellor’s top priority must be action on business energy costs. These are rising faster than our competitors, squeezing margins which will risk choking off the investment recovery.

“With Government policies on climate change set to add as much as 50 per cent to the electricity prices paid by industry by 2020, it must act now to stop planned rises in energy taxes and set out a long-term commitment to compensate energy intensive industries. Without this, we risk losing out on the investment in new technology and jobs that our economy desperately needs.”

EEF wants the current Energy Intensive Industry Package, which compensates intensive energy users against the costs of energy policy on their electricity bills, to be extended until 2021. It also seeks a cut in the carbon price floor, a tax on fossil fuels used to generate electricity, and a freezing of planned increases in the Climate Change Levy.

Manufacturers also want the Government to advance plans to reform funding of apprenticeship schemes, set out clearer details on infrastructure spending, accelerate action to improve the road network and introduce a freeze on new employment red tape.

Meanwhile, a leading Yorkshire business adviser has called for more Government help for manufacturers.

Will Oxley, senior practice leader for Grant Thornton in Leeds, said: “Yorkshire’s forgotten army of medium sized businesses, especially our burgeoning manufacturing sector, is crucial to the continued recovery of the UK economy.”

According to a new Grant Thornton report, the UK’s medium-sized firms outperformed the market over the last five years, with growth of 5.4 per cent compared with 0.7 per cent small firms and 2.4 per cent for large companies between 2007 and 2012 but it believes middle-sized companies are lacking Government support.

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