Manufacturers must do more to combat rising energy costs

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UK manufacturers risk losing their competitiveness in world markets unless more can be done to counter rising energy costs, according to a new report from the business advisory firm, Deloitte.  The balance of power says that it is essential that the manufacturing industry gains a tighter control on energy consumption and expenditure.

David Raistrick, UK Manufacturing Industry Leader at Deloitte, said: Energy cost inflation is not a cyclical trend requiring a temporary response.  For some time now manufacturers have been experiencing inflated energy costs, and higher prices are here to stay. Structural reform is necessary, involving a step-change in thinking, process and actions with regard to energy usage.

The report sets out a number of measures UK manufacturers should undertake in order to tackle the issue, such as:

  • Financial discipline.  Energy needs to be viewed as a strategic issue, not just another annual cost and should be treated with the same financial discipline as other critical business costs.  Manufacturers should apply lean-thinking techniques and treat energy as a scarce resource.
  • Energy management.  The ability to manage energy well by producing more with less may be the difference between success and failure.  Manufacturers need to focus as much on how energy is consumed as well as on price.
  • Sustainability.  Forward-thinking manufacturers are already retrofitting existing plants and facilities to be more energy efficient.  Upfront investment in high-efficiency systems should pay dividends by reducing overall bills.
  • An integrated approach.  The real opportunity to drive down energy costs lies with improving efficiencies in the manufacturing process such as the use of recycled waste-heat and high-efficiency motors.
  • Engaging the workforce.  Managers must empower staff to be energy efficient by giving them explicit responsibilities for energy management and rewarding those who deliver savings. 

Julian Denee, Director in Deloitte's Energy practice, said:  While new sources of energy supply, such as the revival of the UKs nuclear programme, new LNG terminals and gas pipelines and the building of a renewable energy infrastructure, will improve the reliability of energy supplies, they are unlikely to result in cheaper energy for manufacturers in the short term.

High energy prices will continue to put pressure on manufacturer margins for some time.  And if UK manufacturers are to be truly competitive on a world stage, running a tight ship on energy consumption and expenditure will be imperative. 

The new report The balance of power How UK manufacturers control energy costs and remain competitive can be found at: www.deloitte.co.uk/manufacturing

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