Energy costs vex 75% of food and drink manufacturers

10th April 2015

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Nigel Leehane

Food and drink manufacturers are concerned about the rising cost of energy, with 75% citing it is a factor in decisions to expand their business.

The finding is from a survey of 100 food and drink manufacturers by energy company npower. From this month, two elements of electricity market reform (EMR) will start to appear on energy bills; contracts for difference (CfD) and the capacity mechanism.

These elements will initially add around £0.4/MWh to bills, but this will increase over time to £8-10/MWh by 2020, npower pointed out. Its survey examined how rising energy prices would impact the food and drink sector.

Almost two thirds of those surveyed (64%) said they had taken action to improve energy efficiency.

Over a quarter (26%) report that they have either planned cuts to employee numbers or frozen recruitment, while 16% have considered moving production offshore. A further 15% said they would pass the costs of EMR onto customers.

Some 38% of respondents felt that they have had too little warning of the new charges on their bills, and 65% felt that the government should provide more financial compensation to help businesses fund energy policy.

Wayne Mitchell, director of markets and innovation for npower, said: “Hoping that global oil prices will take care of your energy cost problems is not a long-term solution. Our research clearly proves that energy management should be one of the top priorities of every company board.

“Government and energy suppliers must do more to engage businesses about the impact of energy policy. We should be doing everything we can to help them mitigate the risk of rising prices, maintain their competitiveness, and even turn energy into a commercial opportunity where possible,” he said.

Stephen Reeson, head of climate change and energy policy at the Food and Drink Federation, said: “Whilst we fully support the governments focus on greenhouse gas emissions reduction and energy supply security – which is vital to the operations of our sector – we cannot ignore the rising energy prices we continue to face.”

As part of its climate change agreement, the sector is working on a target to reduce energy consumption per tonne of product by 18% by 2020 compared with 2008, he said.

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