Manufacturers fear energy cost and political turmoil will continue to hit output

The political chaos of the last year has hit the competitiveness of the UK as a place to manufacture and made it less attractive for foreign investment, according to a new report.

Two in five of more than 200 firms surveyed said they believe the UK is now less attractive to foreign investors, while more than half warned that on-going political instability was damaging business confidence.

Almost three-quarters of respondents to the Make UK survey expected their energy costs to increase this year, with two-thirds predicting reducing production or cutting jobs despite the Government energy support package.

Three out of five manufacturers said they were increasingly concerned about energy blackouts affecting their business.

Make UK warned that a less generous relief package may not shield companies from the worst of these increases, while excluding some companies which have a high energy exposure but do not currently fall under the traditional ‘energy intensive’ definition.

Stephen Phipson, chief executive at Make UK, said: “The year ahead is going to be very challenging for manufacturers with a potent mix of factors testing their resolve: ongoing supply chain disruption, access to labour and high transport costs which show no sign of abating can be added to a growing sense of economic and political uncertainty in their main markets.

“The biggest risk, however, remains the eye-watering increases in energy costs which has left the clock ticking for many companies.

“While an extension of the energy relief scheme will be welcome, to date it has just been a sticking plaster and making it less generous will make the situation worse for many companies.

“In fact, there is a very strong and urgent case for matching the more generous schemes our competitors have in place.

“Government must also ensure that all major users of energy are included in any extension, not just those traditionally regarded as ‘energy intensive’. Otherwise there are some very significant companies that will fall through the cracks.”

Cara Haffey of PwC, which helped with the study, added: “With the Covid veil now almost completely lifted, the immense challenges still faced by manufacturers means it’s no surprise that the impact of rising energy costs is the most pressing concern according to the firms we spoke to.

“UK manufacturers are resilient by nature, however we face another 12 months where it’s likely that global supply chains will remain stretched and a string of pressure points will continue to spring up, from sourcing and purchasing to fulfilment and distribution.

“All of this plus the need to continue to refine our relationship with the EU – especially in regards to the movement of people – will see manufacturers facing a packed, and somewhat, daunting to-do list.”