Will energy price rises snuff out recovery?

London - Just as some of the first signs of economic recovery are starting to shine through, the UK’s manufacturers are facing significant energy price rises, according to the latest findings from BDO Stoy Hayward’s Quarterly Manufacturing Energy Tracker.

During the second quarter of 2009, oil prices rose by 31 per cent in comparison to the previous quarter – an average of $61.35 a barrel in compared to $46.74 in Q1. Without taking into account demand and supply models for energy prices, manufacturers will be faced with further energy price rises of 17% over the next 10 years as a result of the Government’s plans to reduce carbon dioxide emissions.

“As manufacturing output has risen for four consecutive months now, the last thing manufacturers need is a rise in their energy costs. All energy price rises will do is hamper manufacturers’ chances of success in this tough environment,” said Tom Lawton, head of manufacturing, at BDO Stoy Hayward.

Manufacturers must make the best use of their energy and start looking towards more efficient/greener energy options in the future, particularly in view of the Government’s White Paper on renewable energy, continued Lawton: “One small mercy is that oil prices are still some 52% cheaper that this time last year when oil prices reached an all time average high of $128.19 a barrel.”

But its not all doom and gloom, the BDO manager pointing out that while oil and jet fuel has risen, Q2 gas prices, he said fell by 40% and electricity prices fell by 23 per cent in comparison to Q1 2009.

“Given the difficulties manufacturers have faced over the last six to 12 months, any fall in the price of energy will be a welcome relief to the sector,” concluded Lawton.