Nearly half of Britain’s carmakers and parts suppliers have cut or delayed investment due to rising energy prices, the industry’s trade group has warned, as it urged the government to take “long-term action” on business costs.
Manufacturers’ electricity bills have risen by £100m, putting the industry at risk without additional state support, the Association of Motor Manufacturers and Traders said on Thursday.
As part of an estimated £150bn package, the government will freeze energy prices for businesses for six months from October 1 to help households and companies paying high gas and electricity bills.
More than two-thirds of Britain’s 800 car or parts makers said in the SMMT survey that they were concerned about the viability of business when energy prices are expected to double in spring when the current cap is lifted.
The survey found that 69 percent of companies are concerned about “the impact of onerous cost increases on their business operations.”
Four in 10 companies said they had delayed or cancelled future investment plans because of rising energy costs. Meanwhile, 13% eliminated worker shifts to save money, and another 9% saw further cost savings.
Energy prices for the industry have risen by £100m this year, taking its total bill to £300m, according to SMMT calculations.
SMMT chief executive Mike Hawes welcomed the government’s decision to cap energy prices but said the company’s “costs” [were] It is expected to more than double again next year.”
“With some manufacturers expecting larger increases, longer-term solutions must be found to ensure the viability of the industry after the cap ends in six months’ time,” he added.
Energy costs are just one of the challenges facing automakers and their suppliers, whose logistics costs and raw material prices have surged by about 40 percent over the past 12 months.
Nine in 10 companies told SMMT they were forced to pass on higher costs to customers. That means automakers will pass on higher costs from suppliers to consumers, pushing up the final price of the car.
Hawes warned that companies “have to take drastic measures to protect their businesses in the face of countless challenges”, calling for sweeping changes, including reforming business tax rates, increasing capital allowances to stimulate investment and increasing investment in training.
His comments came as SMMT manufacturing data on Thursday showed UK car production rose 34% in August compared with a “dismal” 2021.
The 49,901 vehicles produced in August are typically among the quietest for the automaker and almost half of pre-coronavirus production levels.
SMMT said August was the fourth consecutive month of higher production compared to the four months to August 2021. But it added that overall levels were still well below pre-pandemic output.
The Department for Business, Energy and Industrial Strategy said the current protection plan meant the auto industry “will pay wholesale energy costs that are less than half the prices expected this winter”.
“Last week we also announced new measures to support businesses, including scrapping plans for a corporate tax hike and reversing a 1.25 percentage point hike in National Insurance contributions,” it added.