01/09/22
Survey shows massive impact of rising energy costs and wider inflationary issues
- Rising energy costs causing major disruption for half of companies
- 1 in 5 companies believe energy costs will be an issue for two years
- Almost a third of companies say NIC increase will impact recruitment
- Three quarters of companies facing increased transport costs
- Producer input prices are currently at 24%, the highest since records began
- There are currently 93,000 live vacancies in the UK manufacturing sector
- Total manufacturing investment is currently lower than it was in pre-pandemic in 2019.
Britain’s manufacturers are calling on the Government to bring forward a package of policy measures on the scale of those seen during the worst points of the pandemic to prevent a permanent scarring of the economy and help avert a severe recession, potentially substantial insolvencies and job losses.
The call comes on the back of data from Make UK showing the massive impact of rising energy costs on companies, together with the cumulative effect of increases in other business expenses such as increased transport costs and disruption alongside National Insurance Contributions and the proposed increase in Corporation Tax.
According to Make UK, the impact of the potent cocktail of factors from the last few years, now being compounded by the energy crisis, is as big a threat to manufacturers as the Covid pandemic, if not greater.
As well as the impact of the rise in energy costs, almost three quarters of companies (74%) say they are facing increased transportation costs and more than four fifths (82%) reported transport disruption is an issue for their business. Four in ten companies surveyed said that disruption at the Dover Calais crossing was causing either catastrophic or major disruption to their business.
The measures Make UK is proposing include specific proposals on energy, as well as a range of measures to aid cashflow, provide greater access to Labour supply along with initiatives to encourage investment, especially in energy efficiency technologies.
Commenting, Chief Executive of Make UK, Stephen Phipson, said:
“Whilst industry has recovered strongly over the last year, we are clearly heading for very stormy waters in the face of eyewatering increases in energy costs and a difficult international environment. This threatens to shatter expectations of a sustained recovery from the pandemic.
“Some of the factors impacting companies are global and cannot be contained by the UK Government alone. However, just as it is quite rightly taking measures to protect the least well off, given the rate at which companies are burning through their balance sheets just to survive, it must take immediate and substantial measures to help shield companies from the worst impact of escalating costs and help protect jobs.
“We need a shock and awe suite of proposals to protect viable companies and jobs and we need them now. Manufacturers cannot afford to wait for a functioning Government to get its feet under the table.”
Among the immediate measures being proposed by Make UK include:
- Reduce VAT on business energy bills from 20% to 5%
- Reverse the National Insurance Contributions increased from 2022
- Extend current business reliefs applied to other sectors to manufacturing
- Extend business rates reliefs for both building improvements and eligible plant & machinery
- Introduce a long-term capital allowance regime to spur investment in green technologies and energy efficiency measures to reduce energy consumption
- Make the Annual Investment Allowance permanent
- Undertake a full and fundamental reform of Business Rates
- Commission the Migration Advisory Committee to review and revise the shortage occupation list by early 2023 at the latest