UK manufacturers fear worst as energy costs mount - Make UK

The UK’s manufacturing sector is at risk of increased job losses and reduced output, an industry survey warned on Monday, as surging energy costs and political instability take their toll.

According to a survey by Make UK, the sector’s trade body, and PwC, 70% of respondents expect energy costs to rise this year, despite government support, with two thirds saying they expected to cut jobs or reduce production in response.

A total of 64% said that increased energy costs were now the biggest risk to their companies, with 60% citing potential blackouts as a concern.

The survey also suggested that the political turmoil seen in 2022 - which included three prime ministers and four chancellors - had affected the UK’s perception as a preferred manufacturing location. A total of just 31% of respondents said the UK was a competitive location, down significantly on 63% a year previously, while 43% believe the country is now less attractive to foreign investors.

Stephen Phipson, chief executive of Make UK, said: "The year ahead is going to be very challenging for manufacturers, with a potent mix of factors testing their resolve.

"Ongoing supply chain disruption, access to labour, and high transport costs which show no sign of abating can be added to a growing sense of economic and political uncertainty in their main markets.

"The biggest risk, however, remains the eye-watering increases in energy costs, which has left the clock ticking for many companies."

Chancellor Jeremy Hunt is due to announce a replacement to the current energy relief scheme for businesses and public sector bodies on Monday. It is widely expected to be less generous, however, after Hunt described the scheme as "unsustainably expensive".

Phipson said: "While an extension of the energy relief scheme will be welcome, to date it has just been a sticking plaster and making it less generous will make the situation worse for many companies."

Cara Haffey, manufacturing leader at PwC UK, said: "With the Covid veil now almost completely lifted, the immense challenges still faced by manufacturers means it’s no surprise that the impact of rising energy costs is the most pressing concern according to the firms we spoke to."

A total of 235 senior executives across manufacturing were questioned about the year ahead for the 2023 Make UK PwC Senior Executive Survey between 26 October and 15 November 2022.