Despite a strong 2020 and 2021 for the UK Chemical sector, the economic headwinds faced throughout 2022 and so far in 2023 has put the industry in recessionary territory, having contracted in the last three quarters.
This can be largely attributed to the increase in the cost of production, with the most significant factor being volatile energy prices. Government support has been scaled back considerably with the EBRS ending on March 31st, and the new EBDS only amounting to a maximum unit discount of £40 per MWh for gas and £89.10 per MWh for electricity, applying to 70% of energy volumes, and only once the price threshold has been exceeded.
Other macro-economic headwinds driving up production costs are increases in the price of raw materials and labour costs. The important difference here is that these costs are mostly driven by competition and factors outside of a business’ control.
However, energy expenditure is an operating cost that manufacturers can have a quick and substantial impact on. Its only competition for capital and available resources that stand in the way of tackling energy. For manufacturers looking to be proactive, there are options available to enact real change through energy efficiency and onsite generation projects.
Our view is that it is now more important than ever for chemical manufacturers to consider how their business can invest in energy efficiency and onsite generation solutions to reduce exposure to wholesale prices and progress towards sustainability commitments.
