Oil price rises could stifle manufacturing recovery
Oil price rises could delay UK manufacturers’ economic recovery, a leading firm of accountants has warned.
According to BDO Stoy Hayward’s Quarterly manufacturing energy tracker, oil prices rose by 31% during the second quarter of 2009, from an average of $46.74 a barrel in the first quarter to $61.35.
The latest quarterly Confederation of British Industry (CBI) Industrial trends survey has shown that while contraction in manufacturing output has eased, a return to growth could still be far away.
The CBI survey, which covers all UK manufacturing sectors, also showed that employment in the food, drink and tobacco sectors continued to fall. 32% of firms reduced numbers employed and just 10% increased over the past three months. About 48% also expected to invest less in plant and machinery over the next 12 months compared with 7% predicting more and 42% the same.
BDO predicts manufacturers will be faced with further energy price rises of 17% over the next 10 years as a result of government plans to reduce carbon dioxide emissions.
Tom Lawton, head of manufacturing at BDO Stoy Hayward, noted that the last thing manufacturers needed was a rise in their energy costs. He said: “All energy price rises will do is hamper manufacturers’ chances of success in this tough environment.”
Lawton added: “Manufacturers need to focus on how they make best use of their energy and start looking towards more efficient/greener energy options - particularly in light of the government’s White Paper on renewable energy.”
However, oil prices are currently around 52% cheaper than this time last year, when they reached an all time average high of $128.19 a barrel. And electricity and gas prices fell during the second quarter of 2009 - gas by 40% and electricity by 23% compared to the first quarter.
