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Many manufacturers are working at pace to find solutions to cope with soaring energy bills. The challenge is huge, especially for firms that are energy intensive in their production.

But I was impressed to see Make UK research, published in September, showing that – in the face of rising energy costs – securing their own energy supply had become a priority for many manufacturers. Over a quarter (27%) of firms surveyed said they had managed to find the funds and moved to onsite energy generation. 

The incentive to do so is clear. The same Make UK research showed that 42% of manufacturers had seen their electricity bills increase by 100% in the past 12 months and 32% said gas prices had increased by over 100% in the same period. 

Keeping the lights on

Some manufacturers are having to choose whether to cut production or shut up shop altogether. 

We, in the UK Corporate Team at Howden, speak regularly to our manufacturer clients about the challenges they face. And I’m always keen to hear opinions from across the market. So, I spoke to James Brougham and Fhaheen Khan, both senior economists at Make UK, about the scale of the challenge facing manufacturers. Fhaheen said: “It is business-ending. We ran a survey in August 2022, in which six in ten businesses identified the situation as business threatening, meaning they were at risk of shutting down completely.”

Of course, there is now extra government help, in the form of the Energy Price Guarantee. However, there are concerns that the six-month support package will be cut off after March 2023, potentially putting many firms in a very difficult position in Spring. 

James said: “This six month of support is borrowed time. Most manufacturers are aware of that. However, certainly for some smaller firms, the pain will be severe if and when that support gets pulled.”

He added that the scheme came too late: “The intervention was needed months before. The UK was late to the party. Some key manufacturing states in Europe, Germany, and others, were some months ahead. This matters as the UK is already at an industrial energy cost disadvantage and this only enhances that”, James said.

We also talked about another, related risk to manufacturers: black outs. 

Fhaheen said: “Overall, we don’t expect blackouts to be significantly damaging to manufacturers, as long as National Grid is able to provide enough notice. In this case, businesses will be able to plan ahead and prepare, by increasing output before a blackout or re-charging generators, if they have them. But how much notice is enough depends on the sector or business.”

Meeting the challenge

So, what of the opportunity for manufacturers to generate their own energy supply? James says: “In our conversations with businesses about how they have been dealing with high energy costs, they most typically are reorganising their production practices to be as energy efficient as possible. However, we have seen growing evidence of energy efficiency investments taking place more as well.” 

The immediate energy crisis provides a strong incentive to invest in green energy. This can have additional benefits of cutting carbon emissions and creating skilled green and digital jobs.

If you do make the move to generating green energy, then it’s important to be aware of the insurance implications. You should make your insurance company aware of any changes to processes and operations or changes to heating methods. The addition of renewable energy generation technology, such as solar panels and bio boilers, all needs to be disclosed to your insurer. 

We at Howden are specialists in this area, and in 2021 launched a new Climate Risk and Resilience division to help firms overcome some of the financial barriers they face in projects that will help us move towards a low-carbon economy.

Help is at hand

The UK Corporate Team at Howden have been Make UK’s insurance partner for 15 years. We offer all our clients, regardless of the size of your business, an advised sale, meaning that we use our manufacturing expertise to advise you on the best insurance for your needs, and we support you every step of the way when taking out insurance and making claims.
To find out more about how we can help, contact the specialist Howden team. Call 01234 230275 or email: [email protected]
Blog / Howden Corporate / Make UK