Trade association Make UK and PwC have released their 2023 ‘Executive Survey,’ which shows that 60% of manufacturers are experiencing growing concerns about blackouts in the coming months due to a lack of security in energy supply.
According to the survey, 70% of manufacturers expected energy costs to increase significantly in 2023. This is 33% higher than employment costs, which was the second expense manufacturers believed would rise significantly.
The UK Government’s Energy Bill Support Scheme, introduced September 2022, was implemented to reduce wholesale gas and electricity unit prices for six months, supporting domestic and non-domestic consumers.
Make UK’s survey revealed that almost 4 in 10 manufacturing leaders didn’t believe the scheme would reduce their energy bills to a “reasonable amount.”
Despite this, the survey showed considerable support for the scheme overall. With the scheme in place for six months, 34% of manufacturing leaders did believe that bills would be reasonable reduced, whilst 30% said the scheme would prevent previously anticipated jobs cuts.
Inevitably, manufacturers have felt the effect of rising energy costs. The survey reports that 73% of manufacturers have experienced reduced profits or margins and 54% saw prices increase.
Since Russia’s invasion of Ukraine, energy bills have continued to sky-rocket. In December 2022, Day Ahead prices reached a record high of £2,585/Mwh.
To help mitigate the predicted cost increase in 2023, manufacturers are taking a number of precursory steps. The most popular of these actions is adjusting business practices, which 54% of manufacturers said that they would do. Other actions include: taking increasing energy costs into account when pricing the final product (53%); onsite energy generation (39%); and reviewing energy procurement strategy (36%).
Rising energy costs also triggered some more drastic actions too, as 13% of manufacturers told the survey that they were considering closing the business.
“The year ahead is going to be very challenging for manufacturers. Ongoing supply chain disruption, access to labour and high transport costs which show no sign of abating can be added to a growing sense of economic and political uncertainty in their main markets,” said Stephen Phipson CBE, CEO at Make UK.
“The biggest risk, however, remains the eye watering increases in energy costs which has left the clock ticking for many companies. As a result, Government must do all it can to shield companies from the worst excesses of these increases and that means leaving everything on the table, including an extension to the energy relief scheme.”
A positive note reported by the survey is that, despite market uncertainty, manufacturers are still planning on investing into their business. The survey showed that the second most popular area of investment was “upskilling or retraining staff” at 52%; this is only 5% less than the top priority for investment in 2023, which was new product development.
“UK manufacturers are resilient by nature, however we face another 12 months where it’s likely that global supply chains will remain stretched and a string of pressure points will continue to spring up, from sourcing and purchasing to fulfilment and distribution. All of this plus the need to continue to refine our relationship with the EU – especially in regards to the movement of people – will see manufacturers facing a packed, and somewhat, daunting to-do list,” said manufacturing leader and PwC UK, Cara Haffey.
