This paper probes the role of labour efficiency in promoting energy efficiency and economic performance with reference to small scale brick enterprises' cluster in Malur, Karnataka State, India. In the bricks industry, the technology in use being similar, labour efficiency has a negative influence on energy cost. Therefore, those enterprises that exhibited higher labour productivities had lower average energy intensity and higher returns to scale as compared to those that had lower labour productivities. Considering this, improvement of labour efficiency can be an alternative approach for energy efficiency improvement in energy intensive small scale industries in developing countries like India, which face the obstacle of financial constraints in up-grading technology as a means of energy efficiency improvement. (c) 2005 Elsevier Ltd. All rights reserved.