Bisley CEO Richard Costin shares his thoughts on the energy related vulnerabilities of the UK manufacturing sector.
At Bisley’s Newport factory, we produce over 15,000 items per week, exporting to over 65 countries around the world. Naturally this requires a lot of energy. Millions of pounds worth of energy.
Early in 2022, our utility contracts were due to expire, and therefore we had to go to tender via brokers rather than be in a position to negotiate. As a result, our gas went up by 681% and our electricity by 303%. In another lifetime, like 18 months ago, this would have seemed impossible. Sadly, now it’s all too real.
Since we agreed new contract terms, in the early autumn of last year following widespread concern about the literal collapse of many sectors as a direct result of soaring energy prices, the Government announced the Energy Bill Relief Scheme for businesses. Details of the commercial scheme only ever referenced a six-month support period which will only kick the epic problem a little further along the road.
It is important to note that included in the Energy Bill Relief Scheme was a reference to ongoing support for vulnerable industries after six months. As a particularly energy intensive sector, UK manufacturers should certainly be considered to be in the vulnerable category and there is significant hope that this will be acknowledged in future energy related announcements [Note: since this article was written, the UK Government has announced the Energy Bills Discount Scheme for non-domestic users, which will run from 1 April 2023 to 31 March 2024].
Why is the UK manufacturing sector so vulnerable at the moment?
There are so many layers to this question and so many possible influences at play that it makes a concise answer near impossible. But let’s start with the impacts of Brexit, the lack of skilled workers, the pandemic, supply chain disruption, Russia’s war in Ukraine, spiralling inflation, the rising cost of borrowing, the escalating costs of raw materials and of course the energy crisis, many of which overlap and all have their part to play, to greater and less extents. But it’s ultimately energy that is the major player here.
After all, without energy, UK manufacturers – which by their very nature are high intensity users – can’t keep the lights on, never mind manufacture anything.
How has the crisis already affected Bisley?
As I stated earlier, in 2022 our energy bills rose exponentially. This was temporarily relieved (in part) by government intervention. However, following two years of investment and turning our business from lossmaking to achieving a small profit, rises on this scale will wipe out hard-won profits, following an intensive two-year efficiency drive.
In the current financial year, we are on target to achieve a reasonable profit, the first time in many years. But now, the vast majority of that hard work will go into energy costs, and future-proofing our finances for whatever will come next, with the bulk of what remains used to support our employees with increases to help with the high cost of living.
As an independently owned British manufacturing firm, outgoings on this level are entirely unsustainable, and without the changes that we have had to make over the past two years, who knows what position we would have been in now due to these increases?
While other UK manufacturers have offshored production over the years, we have been resolute in our commitment to the proud ethos of ‘Made in Britain’, and stood firm against others who move operations overseas and import white labelled products which have been made outside of the UK.
The reality is that, without a seismic movement in a positive direction when it comes to the energy landscape, either because of UK Government policy, or a global shift in circumstances (principally the end of Russia’s war in Ukraine), what happens to the iconic British manufacturing sector remains to be seen. Sadly, I am sure that it is inevitable that some firms will disappear entirely.
Richard Costin is the CEO of Bisley, the Newport-based office furniture designer and manufacturer.