Friday November 3, 2023

Manufacturers call for more government support in the face of elevated energy costs

Economic uncertainty continues to impact the UK manufacturing sector, but with the rate of inflation slowing and forecasts being revised upwards, there are signs that the outlook is improving – albeit at a slow pace.

Despite this optimistic view, UK manufacturers continue to grapple with ongoing challenges that risk inhibiting their future growth. Elevated energy costs have been the biggest operational obstacle over the past year for more than a third of manufacturers (37%) according to our latest manufacturing report, Against the odds: The future of UK manufacturing.

Showcasing the views of a diverse selection of more than 300 of the sector’s senior decision makers, our research found that higher energy costs were also their biggest anticipated risk for the year ahead (32%t).

While energy costs have declined slightly this year, so has the support available from government. Criticism from across the industry has been levelled at the government’s decision to call time on the Energy Bill Relief Scheme in favour of the new Energy Bills Discount Scheme, where firms receive a discount on wholesale prices, rather than having their costs capped.

Given that energy costs are the biggest perceived risk for UK manufacturers for the year ahead, it’s no surprise that a reduction in VAT paid on energy consumption tops the wish list for the Chancellor’s upcoming Autumn Statement, for almost a third of manufacturers (28%). Manufacturers are also calling for energy support measures ahead of winter (21 per cent) and subsidies to support investment in onsite energy generation (21%), which would support their long-term growth and prosperity.

Governments around the world are responding with a raft of policy incentives, but the likelihood is that UK manufacturers will have to wait until after the next General Election for a new comprehensive industrial strategy and any new support.

The results of the report highlight that, while the macroeconomic outlook is improving, UK manufacturers continue to be impacted by elevated energy costs. Despite the pressure this poses to their margins, manufacturers are showing impressive resilience and seizing the initiative – exploring the potential of new technologies and working to build the skills base they need to stay competitive. FRP Question Time

Click below to read the report

Against the odds: The future of UK manufacturing