Energy prices may still push firms over the edge

By Rick Pendrous

- Last updated on GMT

Related tags: Petroleum

Despite energy prices falling towards the end of 2008 following peaks earlier in the year, the prices are still high compared with 2007. This is...

Despite energy prices falling towards the end of 2008 following peaks earlier in the year, the prices are still high compared with 2007.

This is likely to push yet more manufacturing firms over the edge this year unless prices continue to fall significantly, a leading firm of accountants has warned.

According to BDO Stoy Hayward, (part of BDO International) electricity costs were 51% higher in the last quarter of 2008 compared with the same period of 2007 and gas prices were up by 21%.

"Although the trend of these important costs has made a welcome shift downwards in the last quarter, the scale of the increases on an annual basis will have undoubtedly caused major problems to many manufacturers in what is a very difficult economy," said Tom Lawton, head of manufacturing at the accountancy firm.

"Unfortunately we do see that the crisis will have a major impact on the numbers of manufacturing insolvencies this year and in 2010 as a result of the current economic climate."

The final quarter of 2008 did, however, see a huge shift downwards in the price of Brent Crude oil, said BDO Stoy Hayward. On average during the quarter, oil prices were at $52 a barrel compared to $112 in Q3 2008 and $91.70 in Q4 2007.

"There is no doubt that this fall will have come as a welcome relief to the UK's manufacturers," said Lawton.

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