⚡ Energy and exports, what's really going on?

The energy security strategy is the bold, ambitious plan that we need to thwart our dependency on volatile oil and gas prices while firmly marching towards net zero. Exploiting domestic resources is a necessary evil as long as it is temporary.

We go review the strategy below as well as take a look at what’s happening to UK manufacturing exports. ONS data shows UK Trade and Service are down on 2019 levels, but what about goods?

Ps. There is still time to get your hands on tickets to the Make UK National Manufacturing Conference on 3 May.

🏭 Nuclear - Plans to reduce the UK’s reliance on oil and gas by building as many as eight new nuclear reactors, including two at Sizewell in Suffolk. A new body will oversee the delivery of the new plants.

💨 Wind - Reform planning laws to speed up approvals for new offshore wind farms. For onshore wind farms, it wants to develop partnerships with “supportive communities” that want to host turbines in exchange for guaranteed cheaper energy bills.

💧 Hydrogen - Targets for hydrogen production are being doubled to help provide cleaner energy for industry as well as for power, transport and potentially heating.

☀ Solar - Consider reforming rules for installing solar panels on homes and commercial buildings to help increase the current solar capacity by up to five times by 2035.

🛢 Oil and gas - A new licensing round for North Sea projects is being launched in the summer on the basis that producing gas in the UK has a lower carbon footprint than doing so abroad.

🔥 Heat pumps - There will be a £30m “heat pump investment accelerator competition” to make British heat pumps, reducing demand for gas.

We understand that this strategy focuses on energy supply security, and these projects cannot be delivered quickly. At a time of spiralling energy costs and a myriad of other financial burdens on business, industry desperately needs urgent action on the part of the Government to reduce energy prices in the short term.

While the energy Intensive Industries energy compensation scheme is welcome, it still falls short of helping the bulk of the sector. Additionally, smaller companies are desperate to invest in measures to reduce their carbon emissions and maximise their energy efficiency but have their hands tied by the current costs. 

For example, the carbon price could be alleviated, at least temporarily, now that the net-zero direction is firmly set and businesses are wanting to reduce their energy consumption and maximise energy efficiencies, which will also lead to carbon emission reductions.

Make UK has welcomed the Chancellor’s proposal to work with industry on this until the Autumn Budget, but this conversation needs to take place now. 

The changes proposed would help both energy-intensive industries and the others and include the activation of the cost control mechanism within the UK ETS, the removal of the additional Carbon Price Support tax that only UK customers pay and potentially temporarily reducing or removing the Climate Change Levy.

Read our reaction here.

🙂 The good. Manufacturers have long exported their goods and services, and this continues to be the case in 2021.

In fact, over half (55%) attribute over 25% of their sales to international trade too, illustrating that not only are a growing number of manufacturers exploring international trade opportunities but that a growing number of manufacturers are attributing large percentages of their sales to the global market.

But what else do manufacturers attribute this success to?

😐 The not so good. The pandemic represented an unprecedented disruption to the global economy and world trade, with production and consumption significantly scaled back. Combined with the trading disruptions and delays already facing UK businesses from the new trading rules with the EU, companies were up against unparalleled challenges. As a result, we saw exports plummet.

In addition, recent ONS data shows that UK trade in services remained below pre-coronavirus levels, when comparing it with the same quarter in 2019, exports were down 14.2% and imports down 29.3%.

Manufacturers have also spent the last year acclimatising to the new trading relationship with Europe. With Covid-19 already pushing businesses to the limit, the additional layer of complicity due to our new trading environment was a double blow.

Some 16% of companies cited a lack of understanding and compliance with the new business travel rules under UK-EU trade rules, whether this is posting workers for the purposes of global mobility, or the UK Government’s new points-based immigration system which now applies to EU nationals. In addition, one in ten companies said their ability to export their services was due to limitations on staff using professional or academic qualifications.

Despite facing new challenges, manufacturers are continuing to put exporting at the heart of their growth strategies. Here are a few suggestions of what can help cut red tape and support manufacturers’ export. 

🇪🇺 Further extension for CE marked products to be sold on the UK market for products where the legislation in the UK remains the same as in the EU.

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