Steel may be buckling from outside pressures, but UK manufacturing isn’t helpless.
States intervene to help industry
Governments around the world give their industries a helping hand with all kinds of energy incentives from lower taxes to renewable energy levies and import tariffs.
But, as the crisis in the loss-making UK steel industry has illustrated so well, some nations are more generous with their hand-outs than others.
On 3 April, Kiran Stacey, energy correspondent at the Financial Times, reported that: “Germany has handed over 40 times more in energy subsidies to heavy industry since 2013 than the UK.”
Hand-outs aren’t always positive
Whether you think the UK should intervene to save steel making in Port Talbot or not, many feel it’s wise to treat any government intervention with caution.
In the past, subsidies and tariffs have been blamed for distorting the market and creating trade tension, even trade wars. However, national views vary depending on which side you’re trading from – one country’s helping hand is another’s unfair protectionism.
Besides, it’s not just subsidies that are being blamed for making the playing field uneven for the UK’s steel industry. As well as cheap Chinese imports and overproduction, some have also cited the price disparity between low energy bills paid by other EU countries and high bills in the UK.
Coping with energy price disparity
Looking closely at the UK energy market, however, it is not as clear cut as all that. According to UK Power, we may have the second most expensive electricity in Europe after Italy but our gas is one of the cheapest – beaten only by Belgium.
Undoubtedly, subsidies, energy prices and a glut of steel have all had their part to play in the uncertainty surrounding steel at Port Talbot. But there’s one thing we can be sure of – energy prices will always fluctuate and energy affordability remains a great concern for all manufacturers.
Coping with energy price fluctuations should be part of a company’s flexible energy procurement strategy as part of a joined-up energy management plan. To start with, choosing the right contract for your company is vital. A fixed-price energy contract, for example, can provide budget certainty when energy markets are volatile but it can also mean you miss out on low prices when they drop.
Energy management helps business cut costs
The steel crisis illustrates the strength of outside forces, some of which can only be faced down with government intervention, but manufacturers can also take steps to improve their competitiveness by controlling one of their biggest spends: energy and water.
“By taking a positive and proactive approach to energy efficiency, manufacturing companies can control and reduce their energy spend,” says the Carbon Trust in its Sector overview: Manufacturing, introducing energy saving opportunities for business. “All manufacturers are under pressure to cut costs and increase profits, and saving energy is one good way to meet this goal.”
A strategic energy management plan will help companies consume less energy and pay for less, as well as meeting your obligations to reduce carbon emissions targets.
Take control of utilities
Many energy and water savings are easy wins that firms can do themselves, from installing LEDs to engaging employees in turn off or turn down policies.
Other measures such as smarter procurement or constant monitoring and control, may require sophisticated strategies and dedicated energy experts to understand all the ins and outs.
While it’s true that managing energy and lower bills may have a limited part to play in saving British steelmaking for the future, it doesn’t mean manufacturers can’t improve their own position by being more efficient with energy use and reducing wastage. Taking tighter control of utilities is an obvious area where savings can be made.