top of page

British Manufacturers Could Slash Energy Bills With A Clear Strategy

Manufacturers are still being hit with soaring gas and electricity prices, and while the record highs of early 2022 have abated, many businesses are struggling to meet their energy needs. However, one in five manufacturers has still not put a clear energy procurement strategy in place to protect them from the volatility in Britain’s energy market.


The industrial energy market does not have the protections afforded to domestic consumers through the price cap, so working without an energy strategy leaves companies catastrophically exposed to energy market disruption. The lack of a “fall back price” like the domestic energy cap as protection means that future charges for industry could theoretically be limitless. To further mitigate, Government should also look at creating an industrial energy market regulator to protect businesses, particularly Britain’s SMEs from the impacts of poor behaviour on the part of energy companies.


Make UK’s latest research in partnership with Inspired PLC, Energy Procurement: The Cost of Complacency, shows that one in three manufacturers haven’t revised their energy procurement strategy since the energy crisis of 2022. While this still may be prudent for those on longer-term fixed contracts, the abatement of the crisis risks businesses de-prioritising energy procurement strategy, leaving them vulnerable to any potential subsequent crisis.


Key Findings:


  • 1 in 5 manufacturers don’t have a clear energy procurement strategy or do not know what it means to have one – leaving them at the mercy of Britain’s unprotected industrial energy market

  • Government should introduce support for industrial energy users that levels the playing field with our European competitors and remove/offset levies such as the Climate Change Levy for manufacturers along with other renewable energy surcharges

  • Accelerate grid capacity upgrades so UK-based businesses aren’t forced to expand abroad for lack of network capacity

  • Give stronger incentives for on-site generation of energy

The UK imposes several energy-related taxes and levies (e.g. Climate Change Levy), which add to costs for industrial consumers. Some European countries offset such levies for energy-intensive industries to maintain competitiveness and whilst the UK has introduced some levy exemption schemes to support the sector, there is more to be done. Furthermore, European countries like Germany and France provide more substantial subsidies or compensatory frameworks for industries exposed to high energy costs such as partial exemption for energy-intensive industries from certain grid fees or renewable energy surcharges.


France goes further still, maintaining tight control over energy pricing for industrial consumers through regulated tariffs tied to nuclear energy costs (e.g. ARENH in France).


James Brougham, Senior Economist Make UK said: “Energy forms a huge part of UK manufacturers’ input mix, subsequently accounting for a large proportion of production costs. With differing playing fields for UK producers when compared to those abroad, even in our closest neighbours within Europe, it’s little surprise that the sector struggles to remain competitive even where productivity enhancements elsewhere have been sought."


"Compounding the risk, the significant proportion of the sector that is exposed to what is effectively the ‘wild west’ of energy markets in terms of regulation and support without a formal strategy in place further highlights the need for intervention lest we see the UK’s production base continue to erode.”


Dan Hulme, Head of Sales: Key Accounts from Inspired PLC said: “While energy prices are much lower than they were during the peak of the energy crisis, they are still around twice the pre-pandemic average. This is not a time to be complacent."


"Given how sensitive the market remains, manufacturers need to review their strategies and ensure they are aligned with their goals and the behaviour of the energy markets. These strategies should be dynamic and regularly revisited to ensure they continue to achieve their goals and provide protection in an ever-changing market.”


"Government should also give stronger incentives for on-site energy generation alongside an industrial energy price cap. Equalising pricing to Eurozone pricing through a variable energy subsidy would also be hugely beneficial to drive growth and industrial expansion here in the UK."


Read the full report here:


Most Read

RHS Calls For Compensation Due To Financially Devastating Impact Of A3/M25 Roadworks

RHS Calls For Compensation Due To Financially Devastating Impact Of A3/M25 Roadworks

With 350,000 fewer people visiting RHS Garden Wisley annually due to the National Highways A3/M25 roadworks, resulting in £6 million...

What Are The British Holiday Aspirations For 2025?

What Are The British Holiday Aspirations For 2025?

Brits plan to take an average of three holidays next year, spending an average £3051.90 on their main holiday and visiting two new...

Prisoners Could Get ‘AI Cellmate’ To Help Them Learn

Prisoners Could Get ‘AI Cellmate’ To Help Them Learn

Prisoners could be encouraged to embrace learning and move on from crime thanks to a new AI innovation designed to transform education...

Categories

Manufacturers are still being hit with soaring gas and electricity prices, and while the record highs of early 2022 have abated, many businesses are struggling to meet their energy needs. However, one in five manufacturers has still not put a clear energy procurement strategy in place to protect them from the volatility in Britain’s energy market.


The industrial energy market does not have the protections afforded to domestic consumers through the price cap, so working without an energy strategy leaves companies catastrophically exposed to energy market disruption. The lack of a “fall back price” like the domestic energy cap as protection means that future charges for industry could theoretically be limitless. To further mitigate, Government should also look at creating an industrial energy market regulator to protect businesses, particularly Britain’s SMEs from the impacts of poor behaviour on the part of energy companies.


Make UK’s latest research in partnership with Inspired PLC, Energy Procurement: The Cost of Complacency, shows that one in three manufacturers haven’t revised their energy procurement strategy since the energy crisis of 2022. While this still may be prudent for those on longer-term fixed contracts, the abatement of the crisis risks businesses de-prioritising energy procurement strategy, leaving them vulnerable to any potential subsequent crisis.


Key Findings:


  • 1 in 5 manufacturers don’t have a clear energy procurement strategy or do not know what it means to have one – leaving them at the mercy of Britain’s unprotected industrial energy market

  • Government should introduce support for industrial energy users that levels the playing field with our European competitors and remove/offset levies such as the Climate Change Levy for manufacturers along with other renewable energy surcharges

  • Accelerate grid capacity upgrades so UK-based businesses aren’t forced to expand abroad for lack of network capacity

  • Give stronger incentives for on-site generation of energy

The UK imposes several energy-related taxes and levies (e.g. Climate Change Levy), which add to costs for industrial consumers. Some European countries offset such levies for energy-intensive industries to maintain competitiveness and whilst the UK has introduced some levy exemption schemes to support the sector, there is more to be done. Furthermore, European countries like Germany and France provide more substantial subsidies or compensatory frameworks for industries exposed to high energy costs such as partial exemption for energy-intensive industries from certain grid fees or renewable energy surcharges.


France goes further still, maintaining tight control over energy pricing for industrial consumers through regulated tariffs tied to nuclear energy costs (e.g. ARENH in France).


James Brougham, Senior Economist Make UK said: “Energy forms a huge part of UK manufacturers’ input mix, subsequently accounting for a large proportion of production costs. With differing playing fields for UK producers when compared to those abroad, even in our closest neighbours within Europe, it’s little surprise that the sector struggles to remain competitive even where productivity enhancements elsewhere have been sought."


"Compounding the risk, the significant proportion of the sector that is exposed to what is effectively the ‘wild west’ of energy markets in terms of regulation and support without a formal strategy in place further highlights the need for intervention lest we see the UK’s production base continue to erode.”


Dan Hulme, Head of Sales: Key Accounts from Inspired PLC said: “While energy prices are much lower than they were during the peak of the energy crisis, they are still around twice the pre-pandemic average. This is not a time to be complacent."


"Given how sensitive the market remains, manufacturers need to review their strategies and ensure they are aligned with their goals and the behaviour of the energy markets. These strategies should be dynamic and regularly revisited to ensure they continue to achieve their goals and provide protection in an ever-changing market.”


"Government should also give stronger incentives for on-site energy generation alongside an industrial energy price cap. Equalising pricing to Eurozone pricing through a variable energy subsidy would also be hugely beneficial to drive growth and industrial expansion here in the UK."


Read the full report here:


Most Read

RHS Calls For Compensation Due To Financially Devastating Impact Of A3/M25 Roadworks

RHS Calls For Compensation Due To Financially Devastating Impact Of A3/M25 Roadworks

With 350,000 fewer people visiting RHS Garden Wisley annually due to the National Highways A3/M25 roadworks, resulting in £6 million...

What Are The British Holiday Aspirations For 2025?

What Are The British Holiday Aspirations For 2025?

Brits plan to take an average of three holidays next year, spending an average £3051.90 on their main holiday and visiting two new...

Prisoners Could Get ‘AI Cellmate’ To Help Them Learn

Prisoners Could Get ‘AI Cellmate’ To Help Them Learn

Prisoners could be encouraged to embrace learning and move on from crime thanks to a new AI innovation designed to transform education...

Categories

Cardiff City Loan For Will Alves

Cardiff City Loan For Will Alves

Exciting young Leicester City midfielder Will Alves will spend the remainder of the 2024/25 season on loan at Cardiff City, subject to...

LAVA Continues To Grow At Pace With Five New Hires

LAVA Continues To Grow At Pace With Five New Hires

LAVA Advisory Partners, a London-based M&A advisory, has announced five new hires – three Associate Directors, an Analyst and its first...

Brothers Bring Expert Support To Uxbridge Property Owners

Brothers Bring Expert Support To Uxbridge Property Owners

Aspray, a leading loss assessing and property claims management company, is proud to announce that brothers Ravi and Kapil Kumar have...

Recent Posts

bottom of page