Report: UK manufacturers boosting profits by focusing on energy efficiency

UK manufacturers that have taken steps to improve energy efficiency and decarbonise operations are reaping benefits, with 40% reporting increased profit margins and 30% experiencing increased competitiveness.

Report: UK manufacturers boosting profits by focusing on energy efficiency

Already, 12% of manufacturers have had to make job cuts as a direct result of increased energy bills

Those are two of the headline findings from a new research report, delivered by the manufacturer association Make UK and energy firm E.ON. A survey with UK manufacturers prior to the coronavirus pandemic has revealed that those prioritising sustainable practices have reported boosted profits and performance.

The report notes that nine in 10 UK manufacturers are aware of the 2050 net-zero target. In comparison, two-thirds of the general public are unaware of the term or target.

Almost 50% of manufacturers see the net-zero transition as a business opportunity and will be looking to prioritise low-carbon practices to stimulate their own performance.

Commenting on the report, Minister for Energy and Clean Growth, Kwasi Kwarteng, said: “We are committed to eliminating the UK’s contribution to climate change by 2050, and manufacturers that have risen to this challenge now have a key role to play in ensuring a green and resilient economic recovery from Covid-19.

“Businesses putting sustainability at the heart of their operations are boosting profitability, productivity and helping to protect the environment. As we recover from the impact of Covid-19, we must lay the foundations for sustainable growth and a future net-zero economy.”

Despite being conducted prior to the pandemic, E.ON and Make UK believe that sustainability and energy efficiency can be a focal point for manufacturers as part of a wider green recovery.

As outlined in the survey, 30% of manufacturers had been focusing heavily on energy efficiency investments over the last year. Four in 10 manufacturers had renegotiated energy contracts, with 65% of those able to get a better deal.

Many manufacturers are also looking at technological innovations to improve processes. In total, 75% understood the benefits of digitisation, while 57% had installed smart meters and 78% are collecting energy usage data. Additionally, 65% had rolled out behaviour change programmes and activities to encourage employees to improve energy efficiency.

Make UK’s chief executive Stephen Phipson said: “These results show that manufacturers are committed to playing their part in the transition to a net-zero carbon economy. As businesses recover and learn from the COVID-19 crisis, they have the opportunity to ensure improved sustainability is factored into their resilience plans.

“As well as taking steps to reduce energy use and CO2 emissions, they are developing the innovative new products and services we all need to decarbonise.”

However, manufacturers had identified costs of technology and complexity in accessing Government funding and grants as deterrents to improving energy efficiency further. Manufacturers called for more incentivises to enable investments into technology.

In fact, a separate report from think tank The Green Alliance has warned that policy gaps and the uncertainty of Brexit are halting investment from manufacturers into the “new competitiveness frontier” of smart technology, notably for electric vehicles.

E.ON UK’s chief executive Michael Lewis added: “While the response to COVID-19 rightly remains the priority for most manufacturers in the short term, the UK’s net-zero target remains the key challenge for our future. It is heartening to see from this research that awareness of net-zero is high and that manufacturers are investing in energy efficiency and seeing the commercial benefits.

“Both Government and the energy industry must work to remove barriers to further investment as reported by manufacturers, notably cashflow and profit margin impacts, as well as payback periods on investments. The COVID-19 crisis has demonstrated that collaboration and cooperation across government, industry and society can transform how our economy operates and we must now work together to deliver a green recovery which continues the transition to a low-carbon economy but also makes economic sense.”

Matt Mace

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