UK steel manufacturers have made a fresh appeal for urgent government intervention in the energy crisis, warning they are the laughing stock of Europe after being forced to pause production on multiple occasions recently.
It comes a day after the Scottish Power chief executive, Keith Anderson, said Britain’s energy market faced an “absolute massacre” that could force at least 20 suppliers into bankruptcy in the next month unless the government reviews the energy price cap.
The manufacturers’ organisation Make UK said it had hoped the government would have stepped in 10 days ago after receiving assurances from the business secretary, Kwasi Kwarteng.
While the EU has already taken swift action to dig its industries out, Make UK fears the government pledges to support British industry have been caught up in internal wrangling between Kwarteng and the chancellor, Rishi Sunak.
“We haven’t seen any solutions coming back from the government,” said Make UK’s chief executive, Stephen Phipson.
Trade bodies are now warning it is not just gas but also electricity price hikes that are causing a crisis in manufacturing. Gareth Stace, the director of UK Steel, said the cost of electricity jumped from an average of £250 a megawatt hour to £1,000 last Friday, with similar spikes happening erratically for more than a month.
“Companies have to make tough decisions about whether they pause production for those few hours which they have been doing for the past six weeks. These price rises have been astonishing. They are now the rule rather than the exception and may go on for two to three hours before they come down,” he added.
Stace said pausing production was the last thing the already strained steel industry wanted to do as “on-off” production makes plants less efficient, increases emissions and damages furnaces.
Kwarteng made a proposal to the Treasury two weeks ago but Make UK says the expected offer of state-backed loans was not the answer.
“Kwasi was very supportive in our meetings but we were a bit grumpy because a lot of companies won’t take loans because it is not a matter of liquidity, it is competitiveness,” said Phipson, who is now concerned that the Treasury does not understand how mission-critical energy price hikes are to industry.
“This is a burning issue right now. Kwasi did do all that work and we haven’t seen the results of any of it,” he added.
Stace said energy costs in the UK were triple that of rivals in Germany. “We feel we are now losing market share to foreign steel producers, and particularly to those close to us because they can get the steel to our ports quickly, not just EU, but some also from Turkey.
“We have had steel producers come over and constantly laughing, saying, ‘We can flood your market now because we’re much more competitive than we ever have been’.” he said.
The cost of food and drink has gone up between 18 and 20% at production level ,with the cost of materials in manufacturing going up 30 to 40%, Phipson added.
He said members had reported a “recovery in the margins” that suggests they are now passing on the hikes. “That says to me that this is now embedded inflation rather than a transitory increase in materials that will disappear.”