EEF has this week published a new report detailing the results of a recent survey of the views of our members on energy policy and costs, and the practical impacts these are having.
UK manufacturers have for some time been concerned about rising energy costs, both in terms of the damage to competitiveness and the more immediate impact on profitability and firms’ ability to invest. The issue is of particular concern to energy intensive sectors and those exposed to international trade, but it is increasingly clear that it cuts across industry with energy costs affecting manufacturers from a broad range of sectors.
It has long been known that the drive towards a low carbon economy represents a significant opportunity for manufacturers; the tools for decarbonising and driving energy efficiency, from steel wind turbines to building insulation, are the products of manufacturers. Green and growth in UK manufacturing can and should go hand in hand provided we have the right policies to ensure decarbonisation does not entail a weakening of industrial competitiveness but at present this is not occurring.
The survey found that;
- The cost of energy is the greatest energy related concern for 51% of manufacturers and a concern for 83%.
- Energy spend represents 6% or more of total company turnover for 27% of UK manufacturing companies.
- Projected energy price rises could reduce the competitiveness of 53% of manufacturers, see 25% consider investing in facilities outside the UK and cause 34% to reduce spending in other areas of their businesses.
In advance of next May and the finalisation of party manifestos EEF is calling for three broad commitments in support of manufacturers:
- Commitment from all parties for the implementation of the Energy Intensive Industries (EII) compensation package as announced at the 2014 Budget. This should include introduction of the compensation for the costs of renewables as soon as possible and a long-term view of continued protection measures beyond 2019/20.
- A fresh approach to industrial energy efficiency and decarbonisation. This must include; review and reform of the current mechanisms to ensure they are capable of delivering on-going improvements across the sectors they effect, a greater focus on low carbon innovation for the manufacturing sector (such as CCS) and the establishment of an EII decarbonisation strategy drawing on the 2050 low carbon roadmaps.
- Review and reform of the costs of decarbonising the power grid to energy consumers. The current hybrid approach of a carbon price and CfDs to fund low carbon electricity generation is needlessly expensive and inefficient; a first major step to resolution would be to scrap the carbon floor price as soon as fiscally possible. Longer-term thinking must focus on ensuring that emissions-related taxes and policies demonstrably and effectively deliver emissions reductions and are not aimed primarily at raising revenue.
For further information on the survey and our recommendations, please see the report: Energy Policy for Manufacturers: an Agenda for Government.