There can be no doubt that manufacturing businesses are under increasing pressure. Whether it’s rising energy prices, stagnation in investment or higher taxes, it is creating a perfect storm of uncertainty.
British Chamber of Commerce – mounting pressure
Following the publication of the British Chamber of Commerce (BCC) latest Quarterly Economic Survey (QES), its Director General Shevaun Haviland said it laid bare the huge financial stress that firms were coming under, commenting that “The Spring Statement was a missed opportunity to ensure business have greater resilience to weather the uncertain and volatile times ahead.”
The survey, which is the UK’s largest independent survey of business, showed that in Q1 of 2022, inflationary pressures on firms had reached levels never previously recorded in its 33-year history.
When asked what pressures they were facing, 56% of manufacturers cited overheads, mostly relating to energy costs. The report cites one manufacturer from Aberdeen as saying ““Increased energy and fuel costs are causing huge problems. We have had large price increases from packaging suppliers and transport providers over the last six months and the biggest rises are yet to come.”
The report also highlighted business reluctance to invest in plant, machinery or equipment, with 73% of firms reporting there was no change in this area. Indeed, indicators for investment have shown no sign of recovery since the start of the pandemic.
To reduce the stress placed on firms, the BCC has called on government to provide urgent financial support, through the expansion of the energy bills rebate scheme, to include small firms and energy-intensive businesses, and introduce an SME energy price cap to protect smaller firms from some of the price increases.
Confederation of British Industry – manufacturing growth
The Confederation of British Industry (CBI) painted a similar picture in its assessment of the manufacturing sector when it released its latest Industrial Trends Survey.
Its Deputy Chief Economist Anna Leach said that whilst the findings highlighted strong order books and output growth, the cost pressures facing manufacturers have been amplified by the conflict in Ukraine.
She commented: “To deliver a fundamental reset to UK growth, we need to see significant action to incentivise investment, a key driver of productivity growth. A permanent successor to the Super Deduction will ensure that economic resilience and growth go hand-in-hand.”
Intergovernmental Panel on Climate Change – accelerating decarbonisation
Of course, cost pressure challenges are taking place against the need to decarbonise and for businesses to contribute towards national climate reduction targets.
The publication of the United Nations’ Intergovernmental Panel on Climate Change (IPCC) report, which looks at how we can limit climate change, highlights the importance of taking action in the next three years to keep global heating to under 1.5 C as outlined in the 2015 Paris Agreement
In announcing its latest review of climate science, the world’s leading authority on climate science said there must be “rapid, deep and immediate” cuts in carbon emissions to ensure they peak in the next three years and are halved by 2030.
Time to act on climate
With manufacturing accounting for around 12% of global emissions, it shines a spotlight on the need for action today.
Many manufacturers have already committed themselves to more sustainable methods of manufacturing and will be looking at the investments they need to make to reach these targets.
Finance is always one of the biggest barriers to positive change, and many businesses will be put off taking the necessary steps due to a lack of access to investment funds.
As a specialist energy solutions finance company, we’re here to help remove the barriers to energy finance. Not only can we help businesses on their transition to net-zero, but by working closely with customers we can offer solutions that will help them deliver a competitive advantage in the face of mounting pressure.
Capitas Finance specialises in financing energy solutions for carbon-conscious businesses and public sector organisations. Our products and services are designed to help you implement sustainable, low carbon technologies and strategies that accelerate the path to decarbonisation, reduce energy bills and reduce reliance on the grid.
To find out how Capitas can work with you, drop us a line here.
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