Make UK has shared its response to the Energy Security & Net Zero Committee’s call for evidence on business energy costs with the CEA, highlighting the impact that high energy prices are having on UK manufacturers.
In its response, Make UK says that the cost of energy “has remained a primary concern for UK manufacturers”, with more than half of its membership classifying it as their biggest challenge over the coming years. It warns that escalating energy prices are increasingly affecting profitability at a time when businesses are also facing higher capital costs and inconsistent demand.
Make UK argues that businesses can only deliver growth if the Government takes a “serious and holistic approach” to tackling high electricity prices for manufacturers.
The response also looks at the potential for UK industry to electrify.
Make UK cites engineering studies suggesting that up to 90% of industrial energy demand could ultimately be electrified using existing and emerging technologies. Its own data shows that 63% of manufacturers are already taking steps towards electrification, while 87% would be keen to invest more if the gap between gas and electricity prices could be reduced.
However, it says that the cost of electricity and the upfront cost of investment remain significant barriers.
Make UK says:
“If Government can address inflated electricity costs and support upfront investments, then the business case for electrification is made much easier.”
It argues that doing so would also support the UK’s energy security and operational resilience by reducing industry's exposure to fossil fuel price shocks.
The response also warns about the wider economic consequences of high energy costs.
Make UK says that 62% of businesses feel their operations have been affected by global uncertainty, while 13% believe projected energy cost rises could be “life threatening to their operations”.
It also reports that 58% of manufacturers are passing increased costs on to customers, while 21% have been forced to reduce headcount. Make UK argues that these pressures risk making the UK a less attractive place for industrial investment and increasing the risk of operations moving overseas.
Make UK is calling for a combination of immediate support and longer-term reform to bring down energy costs and support industrial decarbonisation.
Its recommendations include:
Make UK says that reducing the cost of energy is "the most effective step Government can take to addressing the challenge of decarbonisation", given the existing appetite among manufacturers to electrify their operations.
The CEA thanks Make UK for sharing its response and the evidence behind it with us.
Read Make UK’s full response to the Energy Security & Net Zero Committee call for evidence.