Manufacturing: under the microscope
Seeking skills
They reported a spread of views, from capping the retail cost of energy for businesses (39%), a long-term loan scheme, similar to that introduced for domestic customers (37%), a reduction in the rate of fuel duty (34%) and a reduction in the 20% rate of VAT on energy (33%). A third (33%) also argued for increased or new subsidies for self-generation. There’s certainly a strong argument for investing in generating clean renewable energy, which can help manufacturers become more energy independent and protect them from future price shocks. At the same time, it boosts a business’ green credentials and can be a great step towards Net Zero. However, in the current environment, it’s clear that government is more likely to prioritise measures that reduce public spending. How confident would you have been about your ability to continue trading for the next six months without the introduction of the Energy Bill Relief Scheme?
Another looming challenge is exposed by the significant number of manufacturers who flagged the availability of labour (23%) and increased wage costs (22%). This is a red flag; as a shortage of technical skills means hiring is becoming increasingly challenging for manufacturers, holding back their potential. The sector has historically struggled to attract the kind of young and diverse talent that can drive its future success. Clearly, there’s an opportunity here to increase awareness of the myriad opportunities in the sector and recruit people from more diverse backgrounds.
Energy
Manufacturing can be an energy intensive process.
That makes achieving Net Zero by 2050 a particular challenge, but an opportunity too. And there are other deadlines looming; the country is committed to cutting carbon by 68% by 2030 and 78% by 2035, compared to 1990 levels. Clearly, there’s a long way to go; the manufacturing and construction industry is the third most polluting industry in the UK and was responsible for 18% of UK greenhouse gas emissions in 2020. We are making progress though; emissions from the industry are already down 17% on where they were five years ago 3 . With the sustainability story being overtaken by events during 2022, we have decided to shine a spotlight on the energy crisis; first asking manufacturers whether they would have been able to continue trading in the short term without the introduction of the Energy Bill Relief Scheme, which will apply a discount to energy costs until April 2023. While two thirds (68%) think they would have survived, a fifth (20%) did not. With around 244,000 manufacturing businesses in the UK 4 , that’s a potential 48,000 firms that could have gone to the wall without government help. A similar number (18%) say they aren’t confident of continuing to trade through the next 12 months without an extension of the Energy Bill Relief Scheme beyond March 2023. And the same proportion (20%) said they didn’t have sufficient headroom in their current financial model to absorb a further rise in energy costs should the Energy Bill Relief Scheme not be extended. All this suggests that there is a cohort of manufacturers for which the energy price crisis poses a genuinely existential threat. When we asked manufacturers how the government could best help them with their energy costs beyond 31 March 2023, there was no silver bullet to solve the issue.
3% Not applicable
16% Not very 4% Not at all
9% Not confident/ unconfident
38% Very
30% Somewhat
*Results based on responses from 100 senior decision makers from heavy manufacturing businesses.
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