UK heading for further de-industrialisation due to rising energy prices

The UK is losing industry at an alarming rate, the main factor at present is the cost of energy.

Having worked within industrial agency for a period in excess of 30 years, we’ve been asking our Managing Director Paul, why we’re facing this energy crisis impacting so heavily on UK losing industry, and how he believes the UK can overcome this.

It is worthwhile considering a number of known facts with regards to UK manufacturing to fully understand this topic: –

1. Our costs of manufacturing are higher than most of Europe.
   
2. 85% of our heating domestically and for manufacturing premises is provided by gas.
   • The massive increase in the cost of gas since the invasion of the Ukraine, has put significant upward pressure on the energy market, and the costs of gas actually generally set the electricity price as well.
     
3. A survey in 2021 of power prices by price comparison site, Cable.co.uk, put the UK at 191 out of 230 countries, on price per kw per hour of electricity.
   
4. Our household electricity prices have surged ahead of our European peers, i.e., Italy; Germany; Netherlands; Spain, and France. Britain actually came in 3^rd behind Germany and Denmark, before the most recent price increase.
   
5. We are not competing well with Europe at present and further afield. I was informed some weeks ago by a manufacturer that the cost of electricity in India, is a third of the cost in the UK.  This is a recipe for disaster for manufacturers.
   
6. Petrol prices are higher than most of Europe, except for Norway; Sweden, and Denmark.

We have large manufacturing clients in four different towns in the North of England, who have announced redundancies since Autumn last year. 

With energy prices likely to stay high, we need action from the Government in order to deal with this matter.

The reality is that we should be looking to re-shore manufacturing to this Country, for a whole host of reasons but the trend to leave the UK appears to be further escalating, primarily due to energy prices and a Government indifferent to the requirements of manufacturers.

What are the ways out of this mess?

1. We need a national energy policy to make the market work better for domestic and commercial users. Even though oil and gas prices have fallen below where they were when Russia invaded Ukraine, energy prices are still likely to go up.
   
2. Liam Halligan in The Sunday Telegraph, on the 19^th of February, said that the energy market was “rigged due to wholesale marginal pricing”.
   
3. Gas provides 39% of our direct power generation, up from 30% in 2012.
   
4. We need a coherent industrial policy and we need to make a special case for our manufacturers large and small, both in terms of energy prices, Local Authority Rates, and planning permissions.
   
5. We need enterprise zones, purely for manufacturing, with 10-year rates holidays and tax-deductible industrial allowances.
   
6. We need to press ahead and put our national ingenuity into creating cheap hydrogen, as we seem to have missed the boat with regard to battery production. This could be a blessing in disguise, as electric cars are not particularly green or sustainable, and really are only a short term fix.  The same could be said for ground and air source heat pumps, which are expensive to install and run.
   
7. The answer must be hydrogen from water and the Government should be encouraging the fantastic minds that we have in this Country to move forward to create the cheapest way of producing hydrogen from water and then we can forget about electric cars and their massively polluting battery production.
   
8. We are ruled by a generation who have little or no interest in manufacturing but have gone through the private and public school sector with no inclination as to what manufacturing is about. Until we change this and seek a broader base for our Government, then we will continue to have a Government that have no experience of and no understanding of manufacturing.

The topic of UK industry is always up for discussion in our office and it’s something we ensure we’re in the know about whether that be to do with energy prices, upcoming manufacturing schemes or Government policies for the future. Have you any thoughts about the current state of our UK manufacturing industry? Let us know.