Despite there being some welcome positivity in the air in the last few weeks around the downward forecast of energy prices and the relatively positive results of the survey Tony Wright and I published on the outlook for the manufacturing sector, this weekend the mood changed it a little.
Firstly, and whilst not exclusively a manufacturing issue, the Times reported that EDF had incorrectly billed 2,000 of its SME customers – meaning they never received the Government's Energy Bill Relief Scheme (EBRS), introduced last September, which provides a discount on wholesale gas and electricity prices for all non-domestic consumers. Suppliers are supposed to apply these reductions automatically.
Whilst this only accounts for about 1% of the SME market EDF covers, any further pressure added to the problems facing SMEs could be enough to make them crack. So 2,000 business being immediately affected by increased cashflow pressure isn’t great Sunday reading. The Times reported that the Federation of Small Businesses has written to Business Secretary, Grant Shapps demanding that relief "arrives on time so that small firms can plan ahead, especially when they're also up against inflation and other cost pressures".
But the big take away was the ongoing saga in the steel industry. Myself and some of my colleagues have advised a number of bio fuel energy plants in Port Talbot where much of the British steel industry is based. For years now there have been pressures on the sector largely driven by policy and politics by my account, as well as a reduction in demand on the industry generally. But throw into the ring Brexit, higher wage costs, and a handicap of increased energy prices on a high energy consuming industry – and the outlook is bleak. In fact LBC reported that the British steel industry is 'at breaking point' with 35,000 jobs at risk.
The BBC also reported that the industry was now "a whisker away from collapse", citing the Unite union (the largest trade union in the UK) with Shapps coming under increasing pressure to meet with a view of offering more government support to the industry. The government has said the success of the steel industry is a priority with Jeremy Hunt rumoured to be proposing to front up £300m for British Steel subject to their Chinese owners investing further in green energy.
A letter written by Steve Turner, Unite's assistant general secretary, said there were a number of issues causing the industry problems. These included "crippling energy costs, carbon taxes, lost markets, lower demand, and open market access for imported steel". Mr Turner also cited "with little meaningful action on the part of government in areas of UK procurement policy, energy pricing support, green energy generation or support for investment in new plant and technologies, the industry is at breaking point".
There does seem to be an impossible task ahead to keep all those exposed to sectors in the manufacturing industry, or indeed the SME market, safe. It’s a colossal headwind that faces a number of these firms – but there does seem to be some positivity in approach. You can read more about this and the attitudes on the outlook of the wider manufacturing industry in our report published here:
But throw into the ring, Brexit, higher wage costs, and a handicap of increased energy prices on a high energy consuming industry – and the outlook is bleak. In fact LBC reported that the British steel industry is 'at breaking point' with 35,000 jobs at risk.