Manufacturers are facing an ‘Energy Armageddon’ as recent non-commodity changes and a new stealth tax have added millions of pounds to crippling bills. That is the stark message from the
www.wthecbm.co.uk Confederation of British Metalforming (CBM), who believe the dire situation is a far larger problem than most of the issues we see in the media every day.
Business leaders have reached the end of their tether trying to compete globally while facing extortionate pricing for gas and electricity supply through the amount of taxes and levies that form parts of the bill.
President Stephen Morley predicted this exact scenario six weeks ago when he spoke about non-commodity electricity price rises due to the new Balancing Services Use of System changes and the Nuclear RAB ‘stealth tax’ — the latter fundamentally seeing firms subsidise the build of Sizewell C.
CBM members have already come forward to explain what this means on the shopfloor, with many expecting increases of between 10 and 30% in the cost of energy over the next six months. In some cases, this equates to an additional £1 million of charges.
Mr Morley said: “This is a massive threat to our industrial security and could be the final nail in the coffin for many manufacturers, who have been badly let down by successive governments. It is just completely unsustainable. If the powers that be continue to force the cost of climate change and ‘net zero’ goals at a pace they tell us is required, then we can’t have the downstream supply chain expected to foot the bill.
He continued: “These are brilliant businesses, who produce vital components for the automotive, aerospace and defence sectors and, through no fault of their own, are having to contend with an unfair playing field. Our CEO Geraldine Bolton relayed this to the Energy Select Committee recently, with a very forthright but articulate argument supporting SMEs, which appears to have fallen on deaf ears!
“We are calling on Keir Starmer and the Business Secretary Peter Kyle to stop burying their heads in the sand and actually do something for the many, rather than just the few larger high-intensity energy businesses they support without consideration of the wider picture. What they don’t realise is that without the SMEs (themselves high energy users), the supply chain across automotive, aerospace and defence firms won’t be able to operate.”
The CBM moved quickly to criticise the Government’s announcement last week that it was saving the UK’s most energy-intensive businesses £420 million per year by increasing the percentage of EII relief. There are currently only around 340 companies receiving this relief, whilst many more businesses – at the mercy of some of the highest energy prices in the G7 – need to benefit in a similar way.
Mr Morley continued: “It’s another example of how Labour seems intent on only giving assistance to the largest businesses — 340 companies are just the tip of the iceberg. There are thousands of manufacturers in the downstream supply chain, including the majority of our members, that would bite your hand off for this type of financial support. However, it appears they are not on the radar and this is not good enough, and I am afraid the situation is only going to get worse with Ofgem’s regulatory framework for energy networks, giving it the platform to generate funding to expand and modernise the electricity transmission network. This is all in support of ‘net zero’ goals at the cost of our manufacturing businesses and those from other sectors.”
Halesowen-based Somers Forge provides completed forged solutions to the aerospace, marine, power generation and defence sector, having supplied the MoD directly for over a century. The business, which is owned by the Folkes family, has already seen its export market dimmish due to higher energy costs and is now expecting a further decline.
As an energy intensive firm — excluded from the highly publicised 90% energy discount recently announced by the Government — it will now be hit by an additional £1 million cost over the next five years to subsidise the new Balancing Services Use of System changes and the build of Sizewell C.
Tammy Inglis, finance director at Somers Forge, said: “Our already diminished export trade could be further devastated by this tax, threatening our investment plans to support our UK defence customers. We have always prided ourselves on our continuous investment to ensure value for money for the UK taxpayer, but this latest energy blow, with more to come next April, will only serve to derail our strategy when sovereignty of supply has been deemed so important by our Government.”
Grant Adams, CEO of automotive specialist Sertec Group, concluded: “I am not convinced our Government ever understands the impact these decisions have on business in the UK. The rising costs of energy are not sustainable, and our sector needs support now, not some distant promise for the future.”