Manufacturers are at risk of losing their competitiveness unless they do more to counter rising energy costs, according to a new report from business advisory firm, Deloitte.
The report, The balance of power, called on manufacturers to seek tighter control of their energy consumption and expenditure.
The report’s message was reinforced by Brammer, one of Europe’s leading distributors of industrial maintenance, repair and overhaul (MRO) products, which has urged companies to reduce their energy consumption in the light of recent record increases in energy costs.
Brammer noted that BDO Stoy Hayward’s quarterly manufacturing energy trackers found that in the third quarter of 2008, electricity prices rose 23% on the previous quarter.
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.”
Brammer’s md Ian Ritchie said: “With energy costs already accounting for more than 12% of UK businesses’ total expenditure, and continuing to rise rapidly, manufacturers face a major challenge to remain competitive.
“However, companies who look closely and systematically at their energy consumption are far more likely to be able to appreciate ‘whole life costs’, taking into account not just a product’s price but its application, operational cost, longevity and reliability.”
Deloitte’s report set out a number of measures to tackle the issue. These included the introduction by manufacturers of greater financial discipline, better energy management, the development of more sustainable operations, the use of more integrated approaches to energy efficiency - such as the use of recycled waste-heat and high-efficiency motors - and last, but not least, by engaging and empowering the workforce to deliver savings.
Brammer’s Ritchie also supported the use of more energy efficient motors: “Motors are found everywhere in industry, powering almost everything from pumps and fans to compressors.
“They are big energy users - indeed, along with drives, they account for more than two thirds of power used in industry. But this means they offer equally attractive scope for energy savings, reduced costs and increased efficiency.”
Julian Denee, director in Deloitte’s energy practice, said: “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.”