The economic woes of the manufacturing sector have been compounded by record increases in the cost of power according to the latest reesearch by BDO Stoy Hayward.
Its Quarterly Manufacturing Energy Tracker found in the third quarter of 2008, UK manufacturers saw electricity prices rise 23 per cent on the previous quarter.
The rise in Q3 meant prices have increased an overwhelming 243 per cent since the same time last year.
Tom Lawton, head of manufacturing at BDO Stoy Hayward and based in the Birmingham office, said: “This is a staggering increase in a key element of the “fixed cost” base of many manufacturers. There is no doubt these cost increases will have taken a significant toll on manufacturers’ margins. Although other energy costs look like they are now reducing, electricity prices look as if they are set to increase – bad news for the sector. The larger UK manufacturing companies are more likely to be able to absorb increases and have the scale to develop other cost cutting measures to keep costs in some form of balance. But these options are often less open to mid tier manufacturers.”
Conversely, the report identified Q3 provided manufacturers with the first fall in oil prices for 22 quarters with the price of oil falling 12 per cent.
And Q3 saw gas prices relatively static, falling a marginal two per cent, the first fall since Q2 2007. Year on year, the price UK manufacturers paid for gas increased 95 per cent.
“While oil prices might be coming down, they are still 49 per cent higher than the same period last year. However, manufacturers will not want to look a gift horse in the mouth, and this fall will have come as a welcome relief to many,” added Lawton. “Particularly, as the fall may go some way to easing increases in other energy costs and transportation.”