Energy bills a business threat for 60 per cent of manufacturers

Nearly half (42 per cent) of those surveyed said their electricity bills have increased by over 100 per cent in the past 12 months, and 53 per cent expect the same in the coming year.

According to Make UK, businesses are facing a ‘stark choice’ of cutting production or closing down if help is not provided. 12 per cent of manufacturers have already made job cuts as a direct result of increased energy bills, but admitted that more drastic action such as full shutdowns and wider redundancies will be needed if the expected price hikes of over 50 per cent materialise in the next year.

The impact is being felt across manufacturers of all sectors and sizes, Make UK added. Companies have attempted to mitigate against this with 58 per cent already adjusting business practices to reduce energy consumption by insulating buildings and installing better performing heat systems.

Over half of the manufacturers said they have already priced increases into their final product. 13 per cent are now reducing production for short periods or avoiding production altogether during peak energy price periods, with seven per cent reducing production for longer periods in the day.

Two fifths of firms have renegotiated a fixed tariff for next year while over a third of firms are actively searching for a new energy provider. 

Securing their own energy supply has become a priority, with over a quarter (27 per cent) of firms saying they have managed to find the funds and have already moved to onsite generation. One in ten have redistributed capital from other parts of the business to cover every costs, while seven per cent have taken on new or further finance to cover rising energy bills.

MORE IN MANUFACTURING

Over 70 per cent said they’d seen reduced margins or profits, with almost every manufacturer surveyed by Make UK saying that government is not doing enough to support industry.

Make UK has set out short, medium and long term actions that it recommends the government takes, pointing out that the UK is ‘lagging’ behind other EU counterparts in offering help for industry, such as the Italian government which has reduced levies placed on gas and electricity bills, reduced VAT and introduced tax credits for energy intensive industries.

In the short term, Make UK urges the government to remove Carbon Price Support to reduce electricity costs, which would save companies almost £90,000 a year, and to explore an Industry Price Cap to freeze prices at an agreed rate. This could be funded directly by government or through working with banks, Make UK said.

Medium term support should include maximising incentives to enable businesses to be less reliant on the National Grid, the manufacturers organisation said. It recommends that government extends 100 per cent rates exemption for plant and machinery use in onsite renewable energy generation and electricity storage from 12 months to at least three years. Business rate relief could also be extended on commercial building improvements (such as insulation) from 12 months to at least three years.

Finally, in the long term, Make UK said that the wholesale market needs rapid reform to decouple electricity prices from the gas price.

“With an increasing number of manufacturers now in survival mode and taking drastic action such as cutting jobs, emergency action is needed by the new Government as soon as they are inside Number 10,” said Stephen Phipson, CEO of Make UK.

“UK manufacturing needs help now if it is to thrive and maintain the millions of well-paid jobs around the whole of the UK and to keep its place as one of the world’s great manufacturing nations.”

What do you think of Make UK's recommendations for the government to support industry? Let us know in the comments section below.