Britain’s economic output is far less energy-intensive that it once was. In 1975, just over 200 tonnes (220 tons) of oil-equivalents were needed for every £1 million ($1.3 million) of gross domestic product, according to UK government data. By 2025, that had fallen to 58 tonnes.

The trend helps explain why growth figures smashed expectations in the first 8 months of the year, and why policymakers are finding the economic impact of the Iran War to have been relatively contained so far.

“The oil-price shock is not having the effect that you might have thought,” said Stephen Millard, deputy director at the National Institute of Economic and Social Research. “It’s raising costs substantially less to firms who are producing GDP than it would have done 10 years ago.”The task of slashing reliance on fossil fuels has been taken up by households and businesses like Kraft Heinz, which installed solar panels at its Telford site in the Midlands to account for 13% of its annual electricity needs. Its Wigan factory in northern England, which produces baked beans, is reducing energy consumption with heat pumps. The American firm plans to do more.

While businesses are increasingly generating energy on-site, electric vehicle sales have rocketed, and petrol and diesel consumption are falling. In the face of another biting energy shock, those efforts have made the UK’s growth more efficient.

Fresh data on Thursday showed the country’s output unexpectedly expanding again in August, with factories leading the way even though they’ve got an elevated exposure to fuel costs.

“Manufacturers need reliable access to energy, just as much as they need reliable access to ingredients and materials,” said Theo Filis, supply-chain director of UK and Ireland at Kraft Heinz. The changes the company’s introduced are “about building resilience into our operations in an increasingly volatile environment.”The shifting energy mix is also forcing the Bank of England to rethink how inflation feeds into the economy. If firms are less vulnerable to higher energy prices, they may be less likely to pass on costs back to consumers, reducing the second-round effects BOE officials obsessively size up when considering a hike.

BOE Deputy Governor Sarah Breeden said on Thursday that businesses had “learned the lessons” of the 2022 shock and that many were “hedged” against the threat of an energy price surge. “That means that the shock that they’re feeling now is less than it would otherwise have been,” she said at the International Monetary Fund and World Bank meetings in Bangkok.

Many firms had already stepped up efforts to shield themselves against energy shocks after the Russian invasion of Ukraine, only for the US-Iran conflict to strengthen the case. Solar-panel installation has soared since 2022, according to government data, reflecting both renewable power producers and businesses’ efforts to reduce their overheads. A poll by manufacturing trade body MakeUK suggests that 38% of its members are investing in on-site renewable energy and storage facilities in response to the conflict in the Middle East. Firms were already being incentivized by Britain’s industrial energy costs, which are among the highest in the developed world.

Patrick Matthewson, senior policy manager at MakeUK, said the shift has helped factories “lock in greater price stability” and “reduce their dependency on the market.”It is not just manufacturers who’ve made a change. At Merry Hill, a shopping center near Dudley in the Midlands that hosts brands like Next and JD Sports, 2,757 solar panels have been installed on the roof, to help it generate all of its electricity from renewable sources.

Consumers are also reducing their exposure. Battery electric vehicle sales are up 30% in the first nine months of 2026, compared to last year, while purchases of petrol and diesel cars decline. Sales of motor fuel are also down sharply in volume terms, suggesting households are driving less in response to higher pump prices.

While households and businesses may still be in for a painful adjustment to the sharp rise in oil and gas costs, lower energy intensity matters, particularly when it comes to the second stage of the inflation shock. Alongside a weak labor market, and investment in artificial intelligence, it’s part of a mix of factors complicating the task for BOE rate-setters trying to calculate how inflation will spread across the economy.

The UK central bank believes there is little evidence of second-round price effects from businesses passing on costs and workers bidding up wages, so far. Still, many of its policymakers are edging toward hiking interest rates next month, with Governor Andrew Bailey saying an increase is becoming more difficult to avoid the longer the war drags on.

That’s contributing to a tricky bond-market backdrop for Chancellor of the Exchequer John Healey, who unveils his budget in less than a fortnight, with expectations on the Bank helping to drive gilt yields higher.

Still, “he seems to have inherited an economy which has been able to withstand all these exogenous shocks,” David Owen, founder of Saltmarsh Economics, said of the chancellor. “The UK has seemingly just sort-of bounced back.”