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Energy-Intensive Sectors Still Lacking Support

Calls for urgent support from the manufacturing sector have become more pressing this week, with Make UK leading calls for the Treasury to better help energy-intensive sectors survive the current energy crisis. Multiple surveys of British manufacturers have shown the growing pressure they face as costs continue to rise.

Manufacturing on the Brink

Two-thirds of manufacturers (67.8%) described the rise in energy costs as either catastrophic or a major disruption. Energy costs are compounded by, and in many cases contributing to, rising costs elsewhere: 72% of manufacturers indicated that increased costs for raw materials were proving equally difficult. 66.8% have seen their transport costs significantly increase.

Energy costs alone don’t tell the full story, however. 75% of UK manufacturers stated that rising energy costs were having a direct impact on their ability to remain competitive within their sector. The energy price crisis has exacerbated what has been a long-running issue for many UK manufacturers. As far back as 2019, UK Steel criticised the government for totally failing to deliver their 2017 Manifesto promise of the lowest energy costs in Europe. The picture hasn’t improved since, with UK manufacturers currently paying around 60% more for their electricity than their German counterparts, and around 51% more than French manufacturers.

The Manufacturing Technology Centre (MTC) this week warned how far the manufacturing sector currently is from achieving collective net zero. MTC is calling for a significant increase in government support for green technologies that are able to boost the sustainability of the UK’s energy-intensive industries.

Without it, research-based on Office for National Statistics figures showed that British manufacturers will still be emitting more than 5,000 tonnes of CO2e by the UK’s net zero deadline of 2050. Without effective offsetting and better support for clean technologies, it forecast that the UK manufacturing sector would not achieve net-zero emissions until 2147, 97 years later than required.

What Support is Available?

An extensive package of support has been announced for domestic energy bills, but UK businesses are still largely waiting on not just support, but a clear picture of what that support might look like if and when it arrives. Some support measures are expected in the Autumn, but may well come too late for many businesses, particularly those with high energy costs.

Some support has been announced specifically for energy-intensive sectors. The existing Energy Intensive Industries Compensation Scheme will be extended for three years and the level of support it provides will be increased. BEIS has said that the funds available to support businesses will more than double.

The scheme provides relief for qualifying businesses on the cost of their UK Emissions Trading Scheme and Carbon Price Support mechanism, two non-commodity elements of their electricity bills. The Renewables Obligation exemption, which allows large energy users to secure a discount on elements of their bills associated with support for renewable energy development, will also increase from 85% to 100%.

Make UK has called for further steps to be taken to protect British manufacturers. Their recommendations include waiting or reducing business rates for the next 12 months, and a review into the effectiveness of business loan schemes implemented during the COVID-19 pandemic. However, a government spokesperson appeared to largely gloss over the call for additional support, stating that manufacturers are already supported via the so-called ‘super-deduction’ that offers tax relief on investments into business development and equipment purchases. Two weeks ago, analysis by the Financial Times found that a year after it was introduced, the super-deduction had failed to impact on levels of business investment.

Taking Control of your Energy

Growing increasingly concerned about their exposure to the volatile energy market, 60% of UK manufacturers are now looking into options for generating their own electricity on-site through distributed generation. A survey by Centrica found that those that had already invested in on-site generation over the past four years have found it beneficial, with 80% intending to increase their available capacity.

UK manufacturers have a well-earned reputation for innovation, and many are exploring alternative technologies that can deliver substantial energy savings while also delivering reductions in carbon emissions and protecting their sites and operations from the threat of power disruption. Powerstar’s patented and real-world proven technologies are at the forefront of this approach, delivering significant improvements across all three aspects of the energy trilemma. This could save your business a significant amount on its energy costs and at the same time lower your emissions to help with your net zero strategy.