Extra relief on the horizon for energy-intensive industries

Large manufacturers like steel and paper mills could receive additional relief on their energy bills under new government plans, but as yet no such support is on the table for under-pressure SMEs.

The UK’s largest energy users already receive exemptions from paying some of the non-commodity costs on their electricity bills, to reflect higher industrial power prices in the UK compared to other countries.

Earlier this year, the government confirmed that it would double the budget of its Energy Intensive Industries (EII) compensation scheme. It is now consulting on the option to increase subsidies further, but eligibility will still be restricted to only around 300 businesses.  

The government hopes the move will help to stabilise the cost of doing business for some key domestic producers of materials such as metals, ceramics, paper, glass and chemicals. Business Secretary Kwasi Kwarteng said:

“British manufacturers are the lifeblood of our economy and central to our plans to overcome this period of economic uncertainty. With global energy prices at record highs, it is essential we explore what more we can do to deliver a competitive future for those strategic industries so we can cut production costs and protect jobs across the UK.”

However, despite calls from UK business groups, there is as yet no direct financial support on the horizon for smaller manufacturers.

Recent analysis from energy consultancy Cornwall Insight suggests that many businesses could face a fivefold increase in energy bills when new contracts are negotiated from October 2022. Even when prices eventually subside, the firm warns they will still remain significantly above their pre-2021 average for the rest of the decade.

Speaking to the Guardian in August, one SME manufacturer said they expected their energy costs to increase from between £15,000-20,000 to more than £50,000 per month in the autumn, while another expects to have to find an extra £300,000 a year despite having already raised its prices by 19 per cent.

GC Business Growth Hub’s Manufacturing and Sustainability teams are on hand to support Greater Manchester SMEs through the energy crisis.

Our Sustainability and Net Zero Service can provide one-to-one support to identify and implement energy saving measures, while the Manufacturing Service offers expert advice on lean and efficient manufacturing practices that can reduce bills.