Skip to main content

UK manufacturers respond to rising energy costs

Steve Gee

MORE than half of UK manufacturers would consider changing their energy source to a renewable supply according to a study just published.

Figures from the latest Close Brothers Business Barometer reveal that, with government policies on climate change predicted to add as much as 50% to the electricity prices paid by the manufacturing industry by 2020*, businesses are being forced to consider alternative sources of energy.

"Seven in 10 of the 400 manufacturers we surveyed admit they are already very concerned about the current impact of energy costs to their business, and that's before you factor in any future rises," said Steve Gee, Managing Director of the manufacturing division at Close Brothers Asset Finance. "Almost half said increased energy costs are squeezing their margins and one in five said it means less cash to invest in their business.

"Our research shows that 55% of manufacturers polled plan to expand operations in 2014, but the concern is that these ambitions may not be achieved if rising energy prices put pressure on cash flow."

In response to the proposed rises, two in five companies polled said they would adopt leaner manufacturing processes, 16% said they would have to lay off staff, while 18% haven’t yet considered how they'll deal with the impact.

When asked if they would consider renewable sources of energy, 54% said yes, 21% said no and a further 21% were undecided.

"It can be difficult for manufacturers to cut back on energy consumption as they are by nature energy intensive businesses," explained Mr Gee. "It is clear however that current sources are increasingly unsustainable so many have no choice but to seriously start looking at how their energy is supplied."

Research from the Carbon Trust suggests that new incentives and building regulations have radically improved the viability of renewables and it’s a sector that looks set to grow in the coming years.