Rising energy costs continue to put significant pressure on UK manufacturers, with new research suggesting many businesses are now moving production overseas to remain competitive.
According to research from Make UK, one in four UK manufacturers has either relocated production abroad or is seriously considering doing so because of the UK’s comparatively high industrial energy prices.
The findings highlight the ongoing challenges facing manufacturers as they balance rising operating costs with the need to remain competitive in global markets.
Why Are Manufacturers Looking Overseas?
Energy remains one of the largest operating costs for many manufacturing businesses.
The report found that UK manufacturers currently pay around:
- 27p per kilowatt-hour for electricity.
By comparison:
- Businesses in other developed countries pay around 16p per kilowatt-hour.
- Manufacturers in the United States pay as little as 6p per kilowatt-hour.
These differences can have a significant impact on production costs, particularly for energy-intensive industries.
More Businesses Are Outsourcing Production
The research also found that:
- Around 10% of manufacturers are already outsourcing more production, particularly to Southeast Asia.
- A further 16% are actively considering doing the same.
For many businesses, relocating production has become a way of managing increasing operating costs and protecting profitability.
However, moving production overseas also presents challenges, including longer supply chains, increased logistics costs and reduced flexibility.
The Competitive Challenge
According to Make UK’s Chief Executive, rising energy costs have dramatically changed manufacturing priorities.
Only a year ago, many businesses were focusing on reshoring supply chains and bringing production back to the UK.
Now, many manufacturers report that domestic suppliers have become too expensive, making overseas production a more commercially viable option.
Alongside electricity prices, manufacturers also face additional environmental levies, including climate-related charges, which further increase operating costs.
Government Support Measures
The government has introduced initiatives aimed at reducing energy costs for some businesses.
British Industry Supercharger
This scheme provides relief from several energy-related levies for around 450 energy-intensive businesses.
British Industrial Competitiveness Scheme (BICS)
A second scheme is expected to extend support to around 10,000 companies by reducing some energy levies.
However, the BICS programme is not due to begin until 2027.
Industry representatives have called for these measures to be introduced sooner and extended to a wider range of manufacturers.
What Does This Mean for Businesses?
While the research focuses on manufacturers, rising energy costs continue to affect businesses across many sectors.
Higher utility bills can influence:
- Pricing strategies
- Profit margins
- Investment decisions
- Recruitment plans
- Expansion opportunities
Businesses experiencing sustained cost pressures may benefit from reviewing financial performance, forecasting cash flow and identifying opportunities to improve efficiency.
Planning for Rising Costs
Although businesses cannot control energy prices, they can strengthen their financial resilience by:
Reviewing Cash Flow
Regular cash flow forecasting can help identify future pressures before they become critical.
Monitoring Profit Margins
Understanding which products or services remain most profitable can support better pricing decisions.
Improving Efficiency
Small operational improvements can often reduce waste and improve productivity without significant investment.
Seeking Professional Advice
Regular financial reviews can help identify opportunities to improve profitability and support long-term planning.
Final Thoughts
The latest research from Make UK highlights the significant impact rising energy costs continue to have on UK manufacturers.
While government support is planned, many businesses remain under pressure as they balance increasing costs with the need to stay competitive.
Whatever sector your business operates in, keeping a close eye on cash flow, profitability and financial planning can help you navigate challenging economic conditions with greater confidence.
If you’d like support reviewing your business finances, improving cash flow or planning for future growth, we’d be happy to help.
📞 01527 368220
📧 info@ojwassociates.co.uk
