Overreliance on energy from fossil fuels is unsustainable because of their regional depletion and associated environmental impacts. The British industrial sector accounts for around one fifth of final energy demand and one third of carbon emissions nationally. This thesis attempts to quantify the potential for industrial energy efficiency from the current baseline, by adopting thermodynamic and economic perspectives. The methodology involves a top-down analysis of energy trends within the manufacturing sector to determine the baseline against which changes are measured, leading to bottom-up case studies which explicitly consider the detailed mechanisms affecting energy demand. Top-down analysis highlights the diversity between industrial sectors, for which a sectoral classification based on process homogeneity is proposed. It also enables the long term, systemic potential for efficiency improvements to be estimated and identifies the barriers to uptake. Bottom-up case studies are better suited to identifying the sectoral potential in the short to medium term. Firstly, the technical potential for heat recovery from industrial sectors is quantified by recourse to thermodynamic quality and spatial considerations. Secondly, an energy and exergy analysis of a glass furnace enables a distinction between avoidable and unavoidable losses, leading to the identification of economic savings. Thirdly, a process integration study at a pulp and paper mill based on a pinch analysis and optimisation of a heat exchanger network highlights economic efficiency improvements. This thesis demonstrates that realising the full industrial energy efficiency potential requires improvements to public policy intended to overcome market-related barriers, especially the EU Emissions Trading Scheme and the Carbon Trust, with additional scope for a mandatory efficiency standard relating to motors. Energy efficiency has to part of a company’s overall strategy to be effective. Future work should focus on heterogeneous sectors and the broader effects on industrial energy efficiency of globalisation and the shift towards services