One of Labour’s biggest donors has urged Andy Burnham to cut sky-high energy prices that are crippling manufacturing, amid fears of an £85bn hit to the economy.

Renewable power entrepreneur Dale Vince called for an end to ‘the energy market absurdity’ that links the price of electricity to gas.

The policy has left industry crumbling under the pressure of ‘life-threatening’ energy bills – hitting jobs, investment and the wider economy. With Burnham expected to take over as Prime Minister this month, Vince urged for the link between gas and electricity prices to be broken. He said gas prices have risen sharply since the Iran war began.

‘British companies continue to face some of the highest energy costs in Europe,’ said Vince, who made his fortune founding the renewable energy company Ecotricity and has handed Labour £5million.

‘Our next Prime Minister must seize the opportunity to lift this burden from our whole economy and finally break the link.’

A report by Ecotricity and industry body Make UK warned that 13 per cent of manufacturers believe further energy price rises ‘could be terminal’ for their business. The report estimated that a 13 per cent decline in manufacturing would cost the economy £85bn a year, adding: ‘High energy costs could force UK factory closures unless the next government acts quickly to cut prices.’

It said elevated energy costs are feeding through the wider economy, with seven in ten manufacturers passing higher bills on to consumers. At the same time, rising costs hit profits and delay investment.

Make UK chief executive Stephen Phipson said: ‘Companies want to invest, innovate and decarbonise, but they cannot do so while electricity prices remain internationally uncompetitive.

‘The incoming government must act quickly, ensuring support reaches the whole manufacturing base while investment decisions are being made now.

‘Without urgent action, we risk losing industrial capacity that will be extremely difficult to rebuild.’