Partner Article

CBM slams Government's decision to reduce energy support for business

**Stephen Morley, President of the Confederation of British Metalforming, the leading trade association for UK manufacturers of fasteners, forgings and pressings, cold-rolled and sheet-metal products, gives his views on the Government’s decision this week to taper the energy support to businesses. **

“A lot has already been written about yesterday’s announcement, but the CBM wants to draw attention to the Government’s fixation on giving additional support to Energy Intensive Industries (EII) at the expense of other heavy energy users whose costs are relative to EII’s as a percentage of their turnover.

Heavy energy users do not qualify for both the current and future schemes and other approved exemptions because the current formula used to categorise an EII is based on high electricity costs and doesn’t reflect the fact that many manufacturers use more gas.

Prices for the latter have gone through the roof and we have been working hard to develop a new energy intensity calculator that covers both forms of energy and provides a ratio against gross value added (profit + payroll costs). We call on the Government to adopt this formula and revise the list of approved EII industries immediately to include heavy energy users.

This gives a far more realistic view of what is happening in industry, especially for SMEs who have had less opportunity to hedge future energy purchasing and have less room to pass costs on.

Many excellent businesses are at a tipping point and this drastic reduction of Government support will only exacerbate this situation and hamper UK manufacturing’s competitiveness in export markets.

The Government says it is only giving what it can afford and they say we have to be more realistic, but they are ignoring the long-term cost of jobs not being retained or even businesses being lost forever.

Rises in unemployment simply stops people spending money in other sectors, so the impact will not be purely felt in industry and will come at a far greater cost to the Government and the country as a whole.“

CBM on the general aftermath of the announcement…

“Yesterday’s news about the introduction of an Energy Business Discount Scheme (EBDS) is yet another example of the Government failing manufacturing again.

The EBDS is the replacement for the current Energy Business Relief Scheme (EBRS), which runs to the end of March 2023 and is currently giving manufacturers vital breathing space as they weather continued supply chain issues and the combined after-effects of Covid-19 and Brexit.

It also mitigated some of the impact from the surge in energy costs, particularly in gas prices that had historically been lower than electricity.

Companies still saw huge increases, which were only tempered by the EBRS, leaving many still struggling to survive.

The CBM have held several meetings with BEIS officials and made representations directly to the Secretary of State for Business, clearly warning about the negative impact of existing support not being extended.

Our lobbying to ensure the ‘cliff edge’ was removed has been ignored, as all yesterday’s announcement does is sound the death knell for lots of well-run companies by pushing some over the cliff edge - exactly what we wanted to avoid.

From the outset, we provided clear evidence of the huge increases in energy costs that our members were facing and detailed how much the support scheme would cover. However, even with the current EBRS in place, many CBM members warned that they would struggle to survive and in one case, we have a manufacturer who has seen energy costs rise from £1m to £4.5m and a turnover that remained relatively flat. How do you even begin to find an answer for that?

We also warned Government that the EBRS only covered the wholesale costs portion of the bill. This works out at around 35% of the total price, so the support only covers a proportion of that depending on the cap.

In addition, the CBM has continually asked for the Government’s support in ensuring suppliers were kept in line, but instead, what we’ve seen are numerous examples of unscrupulous suppliers profiteering by putting up associated costs, such as standing charges.

Over 60% of our members’ electricity bills are made up of taxes and other non commodity costs of which they receive no support by way of Government approved exemptions.

Finally, there has also been evidence of several members being ‘coerced’ into new long-term contracts at higher rates at a time when they didn’t know what the future would hold. With wholesale prices now reducing, suppliers will reap the benefit at the expense of our members who are good, traditional manufacturing businesses.

This was posted in Bdaily's Members' News section by Russ Cockburn .