UK manufacturers could invest £2.5bn in clean energy by 2025, Barclays claims

Economic modelling from Barclays shows that greater investment in energy efficiency and clean technologies could result in significantly higher levels of profitability and value added by the UK manufacturing over the medium and longer term. According to Barclays, the increased investment represents a significant opportunity for UK manufacturing to enhance its international competitiveness through better export performance and protection against low-cost imports.

The Barclays Corporate Banking Powering On report also examines current attitudes of UK manufacturers towards energy supply and management and models how manufacturers could reduce their energy demand.

A survey of 525 managers in the UK manufacturing industry conducted late last year reveals UK manufacturers consider energy resilience as ‘critical’ to the sectors maintaining international competition. The research also demonstrates that availability, reliability and energy costs are among high concerns for businesses, with 27% of manufacturers surveyed suggesting that energy supply is a higher concern to businesses compared to beginning of 2016.

Barclays head of manufacturing, transport and logistics Mike Rigby said: “Energy resilience and costs are vital considerations for UK manufacturers and are a critical element of our manufacturing sector’s ability to compete internationally.

“In recent months, attention has focused on the future of energy supply but we need to look at all aspects of energy.  By considering energy management on the demand side in intensive sectors such as manufacturing, we can ensure the UK remains competitive.”

Energy concerns

The survey shows that manufacturing managers view energy shortages and rising energy prices as significant risks for the UK manufacturing industry. Most of the sector (63%) believes that they are vulnerable to energy shortages and are concerned that current preparations are insufficient, while 60% believe the risk of costs increases and supply disruption will increase the amount of energy as UK imports increases.

Additionally, the survey demonstrates that 75% of respondents are concerned about energy prices and almost half (46%) believe they are vulnerable to effects of energy price increases. Energy availability and reliability is also a major concern, with 58% and 45% of manufactures citing these as concerns.

This survey follows a similar one conducted by npower Business Solutions (nBS) that revealed that 87% of manufacturing businesses are worried about the impact of European energy policy in 2017, with almost two-thirds highlighting Brexit as the main concern for their companies.

Sector solutions

With these significant risks being a point of concern throughout the industry, many manufacturers are investing in energy management technologies or have plans to within the next 12 months. Barclays states that more than a third (35%) of manufacturers are investing in energy efficiency, while 22% are negotiating lengthier energy supplier contracts, and 21% and 13% are looking into material efficiency and self-generation measures respectively.

Barclays claims that if all manufacturers worked to be as energy efficient as current sector leaders, this could create an industry worth £160bn to the wider economy by 2025 and 5.1% increase in value terms compared to 2015, and a £306m increase on the projected value.

Rigby continued: “We know manufacturers are already taking steps to improve their energy resilience, from investing in energy efficiency to self-generation and partnering with resource recovery parks.

“However, our research shows that increasing this investment will not only protect the sector from future fluctuations in energy supply, but will also benefit the wider economy by making the sector more internationally competitive through reduced costs and increased productivity.”

Alex Baldwin