UK manufacturers say they are likely to cut jobs and cut production due to soaring energy costs, according to the survey. The warning shows that British manufacturers are suffering from a surge in inflation, and signals that the outlook for the UK economy may darken further.
The survey of 235 companies was conducted in November 2022 by UK manufacturing lobby Make UK and consultancy PricewaterhouseCoopers (PwC).
According to the survey, energy costs are the biggest concern for manufacturers. Nearly two-thirds of employers said they were concerned about the risk of power outages and expected actions such as reducing production or laying off workers.
UK government cuts energy support makes matters worse
The survey comes as UK finance minister Jeremy Hunt outlines plans to slash energy subsidies for businesses. The scheme will replace existing energy cost support for businesses which is due to end in April this year. The Treasury has previously said high energy subsidies to businesses are unsustainable.
Stephen Phipson, chief executive of Make UK, said that the biggest risk remains unbearable rising energy costs. While the UK government's extension of the energy relief scheme will be welcome, for many companies, cutting subsidies will make the situation worse.
Despite sharp falls in gas and electricity prices in recent weeks, gas costs in Europe and Asia are still five times higher than in the U.S. and before the coronavirus pandemic.
UK government support for businesses on energy will fall by around 85% from current levels, according to reports. Putting further pressure on manufacturers at a time when supply chain disruptions, labor shortages and high borrowing costs are crippling businesses.
A slide in energy subsidies could darken the outlook for the UK economy. Britain faces the worst recession in 2023 compared with other G7 countries due to the negative fallout from the coronavirus pandemic and the Russia-Ukraine conflict, leading British economists said.
Damage to UK competitiveness
British manufacturers have also warned that political chaos is hurting the country's competitiveness and making the country less attractive to foreign investors.
According to the above-mentioned survey, 31% of the companies surveyed believe that the UK is competitive, which is halved from 63% last year, and more than 40% of the companies believe that the UK is less attractive to foreign investors.