Rising energy prices hit food firms’ investment and jobs

By Laurence Gibbons

- Last updated on GMT

Rising energy prices are worrying food and drink manufacturers
Rising energy prices are worrying food and drink manufacturers

Related tags Greenhouse gas

Rising energy policy costs are preventing a whopping three quarters of food and drink manufacturers from investing in their businesses, according to research from energy firm npower.

Over a quarter of food and drink firms have either planned cuts to employees or frozen recruitment as a result of the Electricity Market Reform (EMR), which is set to hit the pockets of manufacturers this month.

It is estimated the additional costs of the EMR could be about 10% of electricity bills by 2020.

‘Increasingly concerned’

The food and drink industry was “increasingly concerned”​ about the impact of rising energy prices, the Food and Drink Federation (FDF) claimed.

“Ultimately it is consumers who will feel the impact in their weekly shopping basket if companies are unable to keep absorbing these costs,”​ the FDF’s head of climate change and energy policy, Stephen Reeson, said.

“But rising energy prices will also substantially impact our sector’s ability to fund low-carbon technologies and grow exports in highly competitive global markets.” 

Whilst the FDF “fully supported”​ the government’s focus on greenhouse gas emissions reduction and energy supply security it couldn’t ignore the rising energy prices the food industry continued to face, Reeson said.

“A strong focus on energy efficiency management and investment in our sector will deliver energy cost savings and help counter future price rises,”​ he added.

“Under the FDF’s Climate Change Agreement, we reduced our energy consumption per tonne of product by over 20%, meaning energy bills were around £300M lower than they might have been otherwise. We expect further savings as we work towards our 2020 target of a further 18% improvement in energy efficiency.”

EMR: what you need to know

  • There are two elements of EMR
  • They are: Contracts for Difference and Capacity Mechanism
  • Costs will rise by £0.4/MWh on a quarterly basis
  • Large energy users’ bills could increase by £8 to £10 per MWh by 2020

Government and energy suppliers must do more to engage businesses about the impact of energy policy, the energy supplier npower claimed.

Risk of rising prices

“We should be doing everything we can to help them mitigate the risk of rising prices, maintain their competitiveness, and even turn energy into a commercial opportunity where possible,”​ said Wayne Mitchell, director of markets and innovation for npower Business Solutions.  

Mitchell encouraged food and drink manufacturers to make energy a top priority for their businesses.

“The reality is that energy bills will start to increase from April, yet we continue to underestimate the impact on large businesses,”​ he said.

“Cut backs and carbon leakage are a concern for UK plc; not only do we risk losing productive, viable businesses but the overall objective of reducing carbon emissions could be lost as well.”

npower's poll key facts

  • 75% were worried about energy prices
  • 26% had planned cuts to employees
  • 65% felt government wasn’t providing enough financial support
  • 38% felt they had little to no warning about price rises
  • 44% said tax policies were important to their business
  • 41% said energy costs were becoming important in the boardroom
  • 15% planned to offset price increases by passing them onto the consumer
  • 16% had considered moving overseas

npower spoke to 100 food and drink manufacturing leaders

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