The cries for relief from high electricity prices, a burden on UK industry, echo through the halls of power. Make UK and the Trades Union Congress, advocates for manufacturers and workers, respectively, have sounded the alarm. Their plea comes at a tumultuous time for the government, with cabinet divisions over defense spending and an impending leadership contest.
The cost of energy in the UK is a significant drag on business competitiveness, and the government's aspirations for industrial revival seem increasingly distant. UK companies face the highest electricity prices in the G7, paying four times more than their US counterparts. This crisis impacts not only energy transition and domestic defense production but also threatens job security and investment.
Make UK's survey reveals startling trends: almost 10% of manufacturers have already moved production overseas, and 16% are considering it. Profit margins are under pressure as energy bills rise faster than product prices. Nearly 40% of companies have delayed investments, and the TUC highlights the potential job losses among the 2.5 million workers in the sector, with over a fifth of surveyed companies already reducing headcount.
The solution proposed is an expansion of the British Industrial Competitiveness Scheme (BICS), which currently provides up to a 25% reduction in electricity bills for qualifying UK manufacturers. Make UK advocates for coverage of all 130,000 manufacturers, which would require an additional £3 billion. This demand challenges the government's targeted support approach, which has been the cornerstone of its industrial strategy.
Make UK and the TUC point to France and Germany as examples, where a larger portion of energy levies is absorbed into general taxation to support industry. The debate extends to the household sector, where similar discussions are ongoing. The government's approach, however, has been to maintain a narrow focus, which Make UK argues falls short of the "bold action" needed to reduce energy costs for businesses.
The crisis, while slow-burning, has real consequences. High-profile closures like the Grangemouth refinery are visible, but the hidden cost is the decision by multinationals to expand overseas rather than in the UK. The trade body's downgraded growth forecasts for manufacturing - 0.4% this year and just 0.1% next year - highlight the urgency of the situation.
The calls from Make UK and the TUC echo those made earlier by the CBI and Energy UK, emphasizing the need for a comprehensive strategy to address energy costs. As the crisis persists, the question remains: will the government heed these calls and take the necessary steps to support UK industry and ensure its competitiveness on the global stage?
