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UK Manufacturing - Energy Costs and Competitiveness
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17th October 2014
Surveys of manufacturing businesses in the UK often ask what aspect of government policy would be most helpful to manufacturers. High up the list of priorities come a better-trained and educated workforce, lower taxes and greater financial incentives to invest in R&D. However, there is one factor that nearly always comes top - energy pricing.
A new survey from the EEF (the manufacturer's trade association) has highlighted the crucial link between energy costs and the competitiveness of manufacturers in the UK.
There is some gold-dust research evidence in the survey and accompanying report for students building their understanding of the factors that determine how competitive manufacturers are - particularly those that are trying to compete in global markets with production based here in the UK.
Some key findings from the survey include:
73% of manufacturers say a projected 50% rise in electricity costs in the UK (by 2020) would have a noticeable impact on profit margins – over half (53%) say it would hit their competitiveness
Energy already accounts for 6% or more of turnover for 27% of firms – affordability is a key concern for 83% of companies
While a third (32%) say the UK's lead in setting ambitious climate targets drives innovation, 41% say it risks undermining competitiveness
The EEF is calling on the next Government to ensure that energy policy supports ambitions for a better-balanced economy - i.e one that is less reliant on services (and in particular financial services) for economic growth.
The EEF report and survey highlights a dilemma facing policymakers in government. They want to do all they can to support manufacturers in the UK to be competitive. However, they are also committed to policies that promote a low carbon economy, including the imposition of a range of "green" taxes on energy.
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