Hundreds of smaller manufacturers, critical to the UK supply chain, could be forced to close when the Government withdraws its Energy Bill Relief Scheme (EBRS) at the end of March.
This stark warning comes from the Confederation of British Metalforming (CBM), who believe the powers that be at Whitehall are missing a massive trick in focusing on just 300 large manufacturers who they class as ‘Energy Intensive’.
The CBM, which has over 200 members made up of sheet metal formers, forgers, fasteners and cold formers, has been inundated with examples of gas and electricity bills rising to nearly 20% of turnover – a situation that is financially unsustainable and one that makes firms uncompetitive against international rivals.
Removal of the EBRS on March 31 will be another hammer blow and President Steve Morley believes the Government must act now before it is too late.
Speaking at an Energy Summit Meeting, attended by West Midlands Mayor Andy Street, he unveiled a 4-point blueprint that he believes will help hundreds of SME manufacturers without ‘breaking the bank’.
The first ask is for the Rt Hon Kemi Badenoch and her team to listen to industry on the shopfloor and realign the Energy Bill Discount Scheme so it actually captures all the energy intensive industries and not just those they perceive to be.
Whilst there will be a cost to the Treasury, the price will not be as big as if it fails to act, with the interdependency of the supply chain meaning a lot of UK industry could collapse, including British steelmakers.
Secondly, the CBM would like to regulate energy suppliers and brokers, who are inflating prices on all other elements of energy costs above the 35% element of the wholesale price.
“The Government is sleepwalking into an industrial disaster, it’s that simple,” explained Stephen Morley, who has worked in manufacturing for nearly 40 years.
“I don’t think the sector has ever seen anything like these price hikes. You have well-run firms who have seen energy bills rise from £600,000 per year to £4.2m and from £4.3m to nearly £6.8…how can you expect them to absorb those and still survive or remain competitive?”
He continued: “The EBRS provided sufficient support for many companies to just survive, but certainly not to invest or thrive. Removing it without nothing in place will result in the death knell of many manufacturing companies and a serious collapse in our already stretched supply chains.”
The CBM is also asking the Government to put right the biggest mis-selling scandal since PPI, with many UK manufacturers coerced into entering fixed contracts at the peak of the wholesale market between July and December 2022.
This period was when suppliers and brokers pushed prices to their highest and advice was that future energy costs would only increase further, meaning management teams chose to take the lesser of two evils.
“Our members also faced new supply contracts being declined based on wrong credit ratings, threat of non-supply or massive security deposits, which were unaffordable,” continued Stephen.
“We believe there is a clear case of mis-selling and the Government needs to step in, investigate and bring in regulation that allows firms to renegotiate these contracts. Several organisations are making massive profits at the expense of UK competitiveness.”
The final element of the CBM blueprint is to bring in policies that allow companies with Coronavirus Business Interruption Loans (CBILS) to extend their payment terms and/or alternatively convert them into green energy initiatives, such as solar panels.
This will be at no cost to the Government and can offer SME manufacturers the opportunity to invest in their energy security going forward.
Stephen concluded: “During the pandemic, the government delivered effective and critical interventions, through furlough and guaranteed loan schemes. It will be deeply shameful and have long-lasting negative effects on Britain, if these initiatives go to waste through failing to address the difficulties our members currently face with energy.
“We have been encouraged by the support of West Midlands Mayor Andy Street, who attended our Energy Summit. Whilst talking with our members, he committed to taking our concerns directly to the Prime Minister, seeking an extension of the EBRS and renegotiation of contracts signed around the peak of energy costs at the end of last year.
“We hope he gets the message across, as we are convinced the worst of the energy crisis hasn’t even begun, and the suicidal cut in Government support from the EBRS to the EBDS will push critical businesses over the brink.”
Read more of our Leadership articles here