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UK Manufacturing - Energy Costs and Competitiveness

Jim Riley

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.

Jim Riley

Jim co-founded tutor2u alongside his twin brother Geoff! Jim is a well-known Business writer and presenter as well as being one of the UK's leading educational technology entrepreneurs.

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