UK manufacturers fear blackouts, job losses and reduced energy subsidies

A survey of British manufacturers found that nearly two-thirds are concerned about blackouts due to the impact of the energy crisis. The industry survey was conducted to gauge concern over government plans to reduce financial support to businesses.

As Jeremy Hunt, the chancellor of the United Kingdom, prepares for a sharp decrease in industry support, Make UK, a trade organization, stated that the effect of high energy costs on manufacturers shows no signs of diminishing.

The industry group, which represents over 20,000 UK companies, stated that cutting financial assistance would lead to job losses and lower factory output. This would negatively affect the economy.

Hunt is expected this week to announce a set of measures that will help businesses cope with high energy prices, including the extension and expansion of an existing scheme beyond March’s expiry date.

The chancellor, however, told bosses last week in a crunch meeting that current measures are “unsustainably pricey” and would be replaced at “a lower level”.

Survey of over 200 manufacturing industry executives by MakeUK and PwC found that 70% of respondents expected their energy costs to rise this year. Two thirds said they would reduce production or job opportunities as a result.

The latest BDO business survey revealed that employers have indicated plans to halt hiring amid fears of a recession. These concerns were prompted by high inflation and pressures on supply chains.

Make UK discovered that as high as 60% of bosses became more worried about blackouts affecting the business. Nearly half (64%) stated that higher energy costs were the greatest threat to their company. More than 13% have considered closing their business or implementing shutdowns. Over one-in-10 of them are contemplating moving production to another country with lower energy prices.

Despite the concern of industry leaders, wholesale electricity prices have fallen dramatically in recent weeks, despite a period when there was relatively mild weather throughout Europe and the UK.

HSBC economists said that falling prices could be a benefit to businesses and can help lower inflation. Elizabeth Martins is a senior economist at the bank. She stated: “If there is only minimal support starting in April, then this drop will be critical for many businesses.

Of course, there are still many bills that go up. However, compared to some of those bills companies faced before [current government support] was introduced], current levels seem decidedly more manageable.”

Stephen Phipson, chief executive of Make UK, stated that the current levels of government support are inadequate. In addition to ongoing supply chain disruption, high labour costs, political uncertainty, and high transportation costs, manufacturers also face challenges with low labor rates, high transport cost, and lack of skilled workers.

It will only make things worse for many companies if it is made less generous. There is an urgent need to match the more generous schemes that our competitors have.

“Government must make sure that all major energy users are included when extending any extension. Not just those considered to be energy intensive.” Without this, there will be some very large companies that fall through the cracks.”

According to BDO’s most recent business surveys, low confidence in the economic outlook is making it difficult for companies to hire new staff.

According to the firm’s employment index, the decline in business hiring intentions was the worst since the fourth quarter 2020, when they had to deal with new Covid restrictions. This was despite businesses reporting slightly better levels of output in December and an increase in business confidence to BDO.

Kaley Crossthwaite, a partner with BDO, stated, “Inflation is clearly being felt across all sectors as employers pause their recruitment plans to consider redundancies to manage rising cost.”