The UK's industrial sector is facing a critical juncture, with nearly one in five manufacturing firms (18%) on the brink of insolvency within the next 12 months due to escalating energy costs. A new industry survey by Make UK has revealed that soaring fuel prices, driven by the ongoing conflict in the Middle East, are taking a devastating toll on Britain's industrial base.
The survey's findings paint a stark picture: nearly half (46%) of industrial companies have seen further increases in their energy bills since the start of the crisis, with six out of ten passing these costs onto customers. Meanwhile, almost all (98%) anticipate a significant squeeze on profitability in the coming quarter, forcing many to delay investments and reduce staff numbers.
Larger businesses are increasingly relocating production to mainland Europe or Asia where energy costs are more favourable, leaving smaller, domestically-focused firms struggling to stay afloat. Phipson warned that unless urgent relief is provided from high energy prices, Britain risks deindustrialisation. The survey revealed that nearly four in ten (38%) companies have delayed planned investments, while over one fifth (21%) have already reduced their workforce.
Make UK is urging the Treasury to intervene by covering the cost of government carbon taxes and levies paid by industrial businesses. These charges amount to an estimated £3 billion, roughly half of which are used to fund upgrades to the national electricity grid. The organisation suggests utilising funds from general taxation, as seen in countries like France and Germany, to help Britain's industrial base recover.
While a subsidy scheme has been extended, offering up to 25% bill reductions for heavy energy users, its full effect is not due until April 2027. However, the Treasury must act swiftly to mitigate the impact of high energy prices on industry and prevent long-term damage to Britain's economy.
The survey's results highlight a worrying trend: smaller firms are being forced to absorb these costs, with over one third (36%) experiencing significant losses due to unaffordable energy bills. This raises concerns about the sustainability of their business models and the viability of the UK's industrial sector in the long term.
As Phipson noted, "The time for talking is over; it's now or never" for urgent action to be taken to support Britain's manufacturers. The Treasury must consider Make UK's proposals seriously and work towards finding a solution that safeguards the future of industry and protects jobs across the country.
In summary, the survey highlights a stark choice facing the UK: either intervene with relief from high energy prices or risk deindustrialisation and the long-term damage to Britain's economy. The Treasury must take swift action to address this pressing issue and safeguard the future of industry in the UK.