The UK's manufacturing sector is facing a crisis due to high electricity prices, according to a recent survey by Make UK and the Trades Union Congress. The survey found that almost one in 10 UK manufacturers have already moved some production overseas, and 16% are considering doing so, due to the high cost of energy. This is having a devastating impact on the industry, with 40% of companies delaying investment and 25% reducing headcount.
The government's current approach to supporting UK manufacturers is seen as inadequate, with the British industrial competitiveness scheme (BICS) only covering 10,000 companies out of 130,000 manufacturers. Make UK is calling for the scheme to be expanded to cover all manufacturers, which would cost £3bn. This would bring UK companies on a level footing with European rivals and help keep industry alive and competitive.
The crisis is not just confined to the manufacturing sector. The high cost of energy is also affecting the government's plans for energy transition and increasing domestic defence production. France and Germany have a more comprehensive approach to supporting industry, absorbing energy levies into general taxation to keep industry alive and competitive.
The government is under pressure to take action to support UK manufacturers. Chancellor of the Exchequer Rishi Sunak is facing a demand for £3bn to expand the BICS scheme, which he may be reluctant to commit to given the current economic situation. However, if the government fails to act, the consequences could be severe, with more companies moving production overseas and job losses on the rise.