UK manufacturers welcome energy discount but point to Germany

London – UK industry leaders have responded with relief to the announcement of the Westminster government’s new year-long Energy Bill Discount Scheme, beginning on 1 April.

The initiative will permit eligible non-domestic customers with contracts with licensed energy suppliers a unit discount of up to £6.97/MWh on their gas bill and up to £19.61/MWh on electricity bills.

Both the director general of UK Steel, Gareth Stace and Stephen Phipson, CEO of manufacturers’ association Make UK agreed the scheme would provide timely benefits at a time of rising energy and other costs,

Phipson commented that the UK government had recognised the need for ongoing support for Britain’s manufacturing sector to protect the thousands of jobs across the UK.

Make UK, he added, would assess how changes in energy support would affect manufacturers, once further details were released.

Stace said it would bring “certainty and stability” for steel producers’ production costs during the challenging economic climate.

The UK steel sector produces 7.2Mt of crude steel a year, equivalent to 70% of UK annual requirement and employs 87,000 people directly in the UK and in supply chains.

“Steel production is highly energy and trade intensive, and the extended support will provide a critical shield against high energy prices, which will continue this year and beyond,” Stace remarked.

However, industry chiefs remain deeply concerned, said both men, that leading trade competitors, notably those based in Germany, would receive far more assistance.

Stace said the UK government was betting heavily on a more stable 2023 energy market, despite a wider climate of unstable global markets and extremely volatile prices.

“The German government guarantees an electricity price of €130/MWh for the whole of 2023, ensuring German industry can continue to operate competitively within Europe and beyond,” he stressed.

“In contrast, the reformed EBDS provides a discount for electricity prices above £185/MWh, leaving UK steel producers paying an estimated 63% more for power than German steel producers this year,” believes Stace.

This situation, he warned, will maintain a long-standing competitive disadvantage for UK producers, resulting in higher production costs and a reduced ability to compete this year. 

“Steel demand and prices are falling in the UK and across Europe, while key input costs remain persistently high, leading to reduced production, shrinking market share, and increased imports for the UK.

"Whilst we are grateful and pleased to see that Government has acted to extend the scheme, there remains a vital gap in that delivery. We urge Government to take the next step and look to match what is provided in Germany for the most energy intensive industries,” said Stace.

These claims were reflected in Phipson's insistence that improved regulation of the industrial energy market was needed, “to mirror the way it applies to domestic users, to ensure that manufacturers are not further overcharged during this crisis period.”

Article published by Process Engineering, an associate publication of European Rubber Journal.