Hike in electricity prices could hit growth, margins and investment

12-Oct-2014 - Last updated on 13-Oct-2014 at 12:40 GMT

Food and drink firms could be hit by a 50% hike in energy prices

Food and drink manufacturers could be hit by a 50% hike in electricity costs by 2020, restricting investment, margins, competitiveness and economic growth, warns the manufacturers’ organisation EEF.

Gareth Stace, head of climate and environment policy at EEF, said the news underlined the need to resolve the tension between the pursuit of low-carbon policies and Britain’s ambitions for a better-balanced economy.

“Failure to do so could hit investment, margins and competitiveness, putting the brakes on growth and leaving our economy stuck in the slow lane,” he said.

‘Time for a fresh approach’

“It’s time for a fresh approach. Low carbon is rapidly becoming synonymous with anti-competitive, which is why we are urging all parties vying for government to commit to review and reform current policies and mechanisms.”

EEF is seeking a “firm commitment” from the government to implement the Energy Intensive Industries package announced in the 2014 budget as soon as possible, Stace said.

This should include introduction of the compensation for the costs of renewables as soon as possible and a long-term view of continued protection measures beyond 2019/20, he claimed.

“High energy costs are crippling for manufacturers of all sizes, but rapid implementation of this scheme would at least reduce the burden on those who are most exposed,” he added.

A fresh approach to industrial energy efficiency and decarbonisation and a review and reform of the costs of decarbonising the power grid to energy consumers are also among the EEF’s agenda for government.

Escalating energy costs could lead a quarter of manufacturers to invest in facilities outside the UK, according to research from the EEF.

Noticeable impact

Almost three quarters of manufacturers (73%) said electricity hikes of this size would have a noticeable impact on their profit margins, while over half (53%) said it would hit their competitiveness. Over a third (34%) would be forced to cut spending in other areas of their business.

Over a quarter of manufacturers are already spending more than 6% of their turnover on energy.

There were also concerns over the adequacy of government energy efficiency schemes – less than one in five firms (19%) said the key UK schemes provided the right incentive to improve energy efficiency, EEF claimed.

Almost four in 10 (38%) believe the schemes are overly complex.

Last month, the Food Manufacture Group held a free one-hour webinar to arm delegates with the information they need to comply with new EU rules requiring mandatory energy audits during the Food Manufacture Group’s energy webinar.

You can listen back to the webinar, once you have registered, here.