Midlands manufacturers in energy supply rethink

UK manufacturers could inject an additional £2.56bn into the UK economy, cut energy consumption by nearly a third (31.6 per cent) and boost their energy resilience by increasing investment in energy technology over the course of the next decade, according to a Barclays report. The research shows a growing concern about the availability, reliability and cost of energy with over 16 per cent of the West Midlands region’s manufacturers surveyed saying that energy supply is more of a concern to their business now than at the start of 2016. This compares to 27 per cent at the national level. These concerns have come to the fore as manufacturers feel squeezed by increases in the price of other raw materials, greater competitive pressure in the sector, and concern over the eventual impact of the UK leaving the European Union. The Barclays Corporate Banking Powering On: Energy Resilience in UK Manufacturing report examines current attitudes of UK manufacturers towards energy supply and management and models how manufacturers could reduce their energy demand. Ray O’Donoghue, corporate banking managing director for Barclays in the West Midlands region, said: “Energy resilience and costs are vital considerations for manufacturers across the West Midlands and we know manufacturers are taking steps to improve their energy resilience, from investing in energy efficiency to self-generation and partnering with resource recovery parks. “Our research shows that working to increase this investment will not only help shield against future changes to the energy supply, but will also benefit the wider economy by making the sector more competitive through reduced costs and increased productivity.” Chief among manufacturers’ concerns today are energy prices, with 44 per cent of the region’s manufacturers citing this as a worry, compared to 75 per cent at a national level. Twenty-seven per cent manufacturers in the region also believe that they are vulnerable to the effects of significant energy price increases, and of these 9 per cent believe that they are very vulnerable. Longer term, the region’s manufacturers are concerned that energy shortages will occur, with 33 per cent expecting these in the next ten years. Most of the sector (29 per cent) believes that they are vulnerable to energy shortages, arguing that current preparations are likely to be insufficient, compared to 63 per cent at a national level. Manufacturers across the region are already investing time and money in a variety of energy management technologies and approaches, or planning to in the next 12 months, with energy efficiency (16 per cent) and self-generation (8 per cent) measures topping the list. The Barclays research reveals that if all manufacturers became as energy efficient as the leaders in the sector, this could create an industry worth £160bn to the wider economy by 2025. This represents an increase of 5.1 per cent in value terms compared to 2015, and a £306m increase on the projected value of the manufacturing sector if it were to remain on its current trajectory, without improvement in energy efficiency. This extra economic output will be achieved by the sector cutting costs and improving its international competitive position, but only if the sector can develop the leadership commitment and resources required. Furthermore, as a single year comparison - in 2025 alone, this improvement in energy efficiency would result in a manufacturing sector using 7.9 per cent less energy than expected. This is the equivalent of successfully cutting the electricity consumption of every house in the UK by 15 per cent compared to today. The region’s manufacturers suggest that increasing access to grants (24 per cent), providing greater certainty on ROI (22 per cent) and sharing best practice within the sector (16 per cent) would be the most effective ways of driving further investment in energy technologies within the sector. More widely, when asked for their views on priorities for UK energy policy, manufacturers are keen that efforts be focused on improving grid efficiency and stability (34 per cent), cutting the cost of energy (29 per cent) and decarbonisation (21 per cent).