Call for government to scrap the carbon price support levy

As a new poll finds the extent to which manufacturers struggling with out of control energy bills, Make UK is calling for government to scrap the Carbon Price Support levy – which only businesses pay – and look at introducing an Industry Price Cap to freeze energy bills at an agreed rate.

According Make UK’s survey, 42 per cent of manufacturers have seen a 100 per cent increase in their electricity bills in the past 12 months, and 32 per cent have seen their gas prices more than double.

Over half (52 per cent) expect their electricity costs to further increase by over 100 per cent in the next 12 months, and 42% expect to see their gas prices increase again by over 100 per cent.

This crisis means businesses are having to choose between cutting production or shutting up shop altogether if help does not come soon, says Make UK.

To cope with spiralling costs, 58 per cent of companies say they are insulating buildings and installing better performing heating systems.

Over a third of firms are actively searching for a new energy provider, and two fifths have renegotiated a fixed tariff for the next year.

Securing their own energy supply has become a priority for many manufacturers, with over a quarter (27 per cent) of firms saying they have already moved to onsite generation.

Over seven in ten have seen reduced margins or profits as they struggle to pay the bills, with almost every manufacturer surveyed saying government is not doing enough to support industry.

The UK is currently lagging way behind other EU counterparts who are offering far more emergency help for industry – the Italian government for example has reduced levies placed on gas and electricity bills, reduced VAT and introduced tax credits for energy intensive industries.

To bring the critical help to UK businesses, Make UK says Truss’s new government urgently needs to take short term, medium term, and long-term action.

Short term
•  Remove Carbon Price Support to reduce electricity costs. For medium electricity users this would save companies almost £90,000 a year
•   Explore Industry Price Cap to freeze prices at an agreed rate – funded either directly by Government or explore way of working with banks to fund an arrangement to finance a cap

Medium term
•  Maximise incentives to enable businesses to be less reliant on the National Grid. Extend 100% rates exemption for plant and machinery use in onsite renewable energy generation and electricity storage from 12 months to at least 3 years, more reflective of the payback period of the investment.
•  Extend business rate relief on commercial building improvements (eg insulation) from 12 months to at least 3 years

Long term
•  Rapidly reform wholesale market to decouple electricity prices from the gas price

Stephen Phipson, CEO of Make UK, said: “As energy bills spiral out of control, manufacturers are working tirelessly to find ways to reduce consumption, putting in place as much as they can afford in terms of building improvements and installing renewable sources of energy. Government must step in to help struggling businesses.

“This must see the immediate removal of Carbon Price Support, which would at once bring down electricity prices for businesses, and the introduction of an Industry Price Cap which could be funded in a variety of ways. We are already lagging behind our global competitors, and the prolonged lack of action by the UK government is making this worse.”