Electric shock for manufacturers
ENERGY prices have risen a whopping 243% over the past year and rose by more than 20% in just the last quarter alone, according to BDO Stoy Hayward’s quarterly energy tracker.
The report shows that energy prices rose by 23% in quarter three 2008 compared to the same period last year although gas prices remained virtually static.
Despite a year-on-year rise of 95% gas prices fell by 2%. The tracker also found some relief in oil costs with prices falling by 12% – the first drop in 22 quarters. However, they are still 49% higher than last year’s figures.
Philip Storer manufacturing partner at BDO Stoy Hayward in Manchester, said: “This is a staggering increase in a key element of the “fixed cost” base of many manufacturers. There is no doubt that these cost increases will have taken a significant toll on manufacturers’ margins over the past year.
“Although other energy costs look like they are now reducing electricity prices look as if they are set to increase – which is bad news for the sector.”
He added that larger UK manufacturing companies were more likely to be able to absorb these increases and have the scale to develop other cost cutting measures to keep overall costs in some form of balance.
But he warned that these options were often less open to mid tier manufacturers.
“UK manufacturers are entering a very difficult period and should establish close management of key costs, including energy costs, to ensure that all steps possible are taken to minimise costs and cost increases,” added Mr Storer.
