Coronavirus is new but recessions are not: How engineering can learn lessons from the past
13 Jan 2021
Learning from previous recessions and seizing cost saving opportunities should be the priorities for the engineering sector now, says Andy Grover.
British engineering has long since been heralded as one of the most robust and forward-thinking industries in the world, with a proud tradition of supporting the infrastructure of our country and providing stability through thick and thin.
Never has this been more evident than when businesses across all spectrums of the industry pulled together to create over 25,000 ventilators at short notice, helping our ailing health service and saving lives in the process.
However, as the dust settles and the pandemonium caused by a pandemic that has decimated the British economy to an extent never seen before becomes apparent, there is a stark realisation that not even this mainstay of British institutions is exempt from the adverse economic effects of Covid-19 and nor does it have any level of immunity against the uncertainty that now engulfs much of the country’s business community.
As the wheels of economic activity now begin to motion once more, business leaders within the engineering sector now have a huge quandary with a series of considerations and questions. What will the ‘new normal’ look like? What will the true extent of the impact amount to? How long will it take to recover? How can ambition be balanced with economic reality and business survival?
Previous recessions have certainly indicated that the sector can and will bounce back. Momentum in business is always key and the need to retain valued staff, many of whom may have contributed to the prior growth of the business and will certainly be key to facilitating recovery, has seldom been greater. Therefore, regardless of forward strategy, surely now more than ever is the time to explore every cost-cutting measure available before resorting to relinquishing valuable staff.
Aside from staff and perhaps building and wholesale costs, energy will likely be amongst the highest commercial overheads and is often the area of expenditure attracting least internal knowledge and expertise. As such, this is an area that can easily be overlooked and may constitute an opportunity to substantially cut costs.
Business leaders within the engineering sector now have a huge quandary with a series of considerations and questions. What will the ‘new normal’ look like?
This is particularly true given one by-product of the pandemic is that oil prices collapsed to around $20 a barrel and whilst this has recovered slightly, now still represents a seemingly excellent time to purchase either as part of a flexible procurement strategy or through a traditional fixed term agreement.
There is also the adage that the cheapest unit of energy is the one that isn’t used and recent advancements in energy efficiency and on-site generation technology have been matched by an evolution in finance options, meaning that in many cases measures may be implemented which derive immediate savings without any capital outlay or risk.
Additionally, some engineering firms are regarded as intensive energy users and as such may qualify for exemption from certain key aspects of energy spend such as Feed-In Tariff and renewable obligation which combined form approaching 25% of overall energy spend. The government introduced the legislation called Energy Intensive Industries exemption and it is thought that many eligible businesses still aren’t claiming, despite it being launched in 2016.
And finally, it is well worth engaging with a reputable, experienced consultant whom has the capacity to review and advise around non-energy costs including set capacity and metering. You may be pleasantly surprised at the levels of savings which may be possible, especially if all utilities are included within the review.