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Home›Chemical Industry›Crisis as energy costs at factories rise by up to £1million a month

Crisis as energy costs at factories rise by up to £1million a month

By Teresa B. Jackson
January 15, 2022
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UK manufacturers in ‘survival’ mode as they endure the pain of spiraling energy bills already threatening consumers’ cost of living crisis

By Luke Barr and Mark Banham, Financial Mail on Sunday

Published: 4:50 p.m. EST, January 15, 2022 | Update: 4:50 p.m. EST, January 15, 2022










UK manufacturers are in ‘survival’ mode as they endure the pain of spiraling energy bills that are already threatening a cost of living crisis for consumers.

A spike in the cost of electricity has left energy-intensive companies in sectors such as ceramics, chemicals, glass and steel grappling with the prospect of factory closures and job cuts.

Industry groups say a lack of government support, despite months of talks with UK ministers, could mean some manufacturers will soon reach critical levels of financial difficulty.

Fighting for survival: Industry groups say a lack of government support could mean some manufacturers will soon hit critical levels of financial hardship

The chemist Solenis, which produces a polymer used in wastewater treatment and papermaking, has seen its energy bills quadruple in the past two years.

David Calder, who runs Solenis’ 550-person site in Bradford, said he was facing an extra £1million a month on the company’s average monthly fuel bill. Previously, the site’s annual energy cost was less than £10m while it is now over £20m. He said: “I’ve been in the industry for over 35 years and I’ve never seen anything like it. It’s even worse than I imagined.

Glass giant Pilkington – once a sponsor of England’s Rugby Football Union – said its energy bill had risen by a further £10million. Managing director Neil Syder told the Mail on Sunday that the cost of Pilkington’s average 4mm glass product had risen by 30%, equivalent to a £4,000 increase for a bulk order of 25 tonnes. But this is not fully passed on to Pilkington’s customers, with the company absorbing some of the costs itself.

“We don’t profit from it, but we have to pass some of the costs on to customers,” he said. “But we don’t pass on the full cost.”

Syder added that he hoped for government support. But Dave Dalton, chief executive of industry body British Glass, said rising energy costs have left businesses facing “death by 1,000 paper cuts”. He added that the glass industry has forecast energy costs of £969 million for the year ahead, meaning many businesses are unable to make a profit.

Dalton said a company that typically spends £40m a year on energy saw that bill soar to £100m last year. And that is expected to climb to £200m in 2022 on average. British Glass sent a letter to the UK government last week saying ministers had yet to ‘appreciate the seriousness’ of the situation as companies were in an ‘impossible position’. He added: “We are beyond the margins, we are not making money. We can survive, but survival is not a mechanism for life and business.

The delay of any government action is a growing concern, industry groups have said. Stephen Elliot, chief executive of the Chemical Industries Association, said: ‘We don’t want the government to leave it until we have a shutdown.

There has already been a shutdown on English soil linked to the energy cost crisis, with fertilizer giant CF Industries forced to temporarily close two factories last year.

CF, which produces around 60% of the UK’s commercial CO2 needs, has received a taxpayer-funded grant worth tens of millions.

Labor and the Liberal Democrats have proposed respective funds worth £600million and £500million respectively to tackle the energy crisis, which would provide financial support to energy-intensive businesses most at risk.

A government spokesperson said: “Ministers continue to engage constructively with industry to understand and help mitigate the impacts of high global gas prices, building on the £120m we provide each year to reduce electricity costs.”

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