The Real Price of Energy for UK Industry
UK industry is under immense pressure. Just like many households up and down the country that are in a cost-of-living crisis which has seen costs spiral out of control, UK manufacturing is close to breaking point.
MakeUK gave a stark warning back in November about the scale of the issue, citing six in ten manufacturers they quizzed who considered energy costs to be business threatening. Since then the government took steps to offer some breathing space to industry through the Energy Bill Relief Scheme, but this is planned to be significantly scaled back from April.
There is an important balance to be struck here, between the contribution of UK industry to the economy, the millions of jobs its supports, and the overall cost to the country to support industry at a time when the country’s finances are stretched. To what extent the taxpayer should be asked to help is an open question for another time, but it’s clear that mismanagement of supplies and stockpiling, in particular of natural gas, has made the UK less competitive. So, while it is an open question, the amount the taxpayer is paying for government mismanagement is a part of that debate.
It is telling that, despite being better prepared when it came to natural gas stocks, Germany is supporting its industry with energy costs to the tune of about double what the UK government is, as a share of GDP.
Back in November, Stephen Phipson, CEO of Make UK, talked about manufacturers working tirelessly to find ways to reduce consumption. And rightly so. Many of our clients offer a range of hardware and software solutions that can reduce energy consumption by a huge amount and the ROI on many of these technologies will help make UK industry more productive and competitive for years to come, as well as contributing significantly to net-zero ambitions. Investing in such technologies should be encouraged and the government can do much more to help companies that are investing in both high-tech and low-tech energy reduction strategies.
In the midst of the worst of it all for UK industry, there is a singular opportunity. Just as it showed incredible agility and resilience during the pandemic, UK industry, with the right government support, has another opportunity to prove itself a vital resource to the health of the nation.
The energy crisis has exposed the frailties of our outdated approach to energy in the UK (and beyond). Despite the move towards renewables in recent years and the plans to become more energy independent through renewable energy sources, Russia’s invasion of Ukraine and the associated sanctions has shown how far we still have to go. This could and should be a catalyst to bringing forward the country’s net-zero ambitions. Granted, new renewable generation at scale takes a long time to come on stream, but there is much that can be done at a smaller scale, and UK industry should be given generous support to reduce its pull from the grid through onsite generation, reduced consumption, and better energy management. Government investment in the form of tax breaks and grants to help every single UK industrial company reduce their energy consumption and improve their energy independence will be repaid many times over through improved productivity, competitiveness and the holy grail of growth.
The short-term impact of the energy crisis is awful. It has brought UK industry to the brink. But the mid-term and long-term impacts are not yet decided. They are in play – they are an opportunity to be seized. It is time for a concerted effort to kick-start a smarter plan to make UK industry more resilient when it comes to energy. The ROI is short and the benefits to both the UK economy and the health of the planet are huge.
