Net zero: Manufacturers call for energy efficiency focus in UK recovery plans

Industry reaping huge rewards from investing in energy saving measures but more government support needed, Make UK warns

British manufacturers have become the latest to join increasingly vocal calls for the government to build a green recovery from the coronavirus crisis, after an industry study today highlighted the huge business benefits that can come from investing in energy efficiency measures and green energy contracts.

Research undertaken by trade body Make UK and energy giant E.ON found that before Covid-19 wrought havoc on society, many manufacturers had made significant progress in becoming more energy efficient over the past year, delivering a direct boost to both profits and competitiveness.

Just under a third of 186 Make UK members which responded to the survey said they had made energy efficiency investments over the past 12 months, most commonly to improve buildings, equipment, and manufacturing processes.

Other simple measures which did not require major investments included buying energy from renewable sources, switching to LED lighting and controls, or replacing outdated equipment such as fans and pump systems.

And of those to have invested in energy efficiency, 40 per cent reported higher profit margins and 30 per cent reported increased competitiveness as a direct result of their investments, the research found.

Moreover, 40 per cent said they had renegotiated their energy contracts over the past year, with 65 per cent of those reporting they were able to secure a better deal, although concern over high energy prices remains a key concern for manufacturers, according to Make UK.

The UK's net zero agenda appears to be driving some of the industry's efficiency push, too, with around 90 per cent of respondents reportedly aware of the UK's statutory 2050 net zero emissions target, around half of which view the decarbonisation goal as an opportunity for their business.

Make UK CEO Stephen Phipson said the results of the study demonstrated manufacturers' commitment to "playing their part in the transition to a net zero carbon economy".

"As businesses recover and learn from the Covid-19 crisis, they have the opportunity to ensure improved sustainability is factored into their resilience plans," he added. "As well as taking steps to reduce energy use and CO2 emissions, they are developing the innovative new products and services we all need to decarbonise. With the right policy and regulatory environment manufacturers could move even more quickly to unlock the benefits of green growth, and we look forward to working in partnership with government, regulators and the energy industry to make that happen as part of the future new norm."

It comes amid growing clamour from hundreds of businesses, investors, politicians, and green campaigners for state support and stimulus measures to drive a green recovery in the wake of the crisis and avoid locking-in a new generation of high carbon infrastructure. Instead, consensus is increasingly tipping towards the need for recovery investments to focus on green infrastructure, particularly given the UK's net zero climate commitments and disarray in the oil, gas and coal sectors at present. Earlier this month, a group of leading economists including Nobel Prize winner Joseph Stiglitz and Lord Nicholas Stern concluded post-recession green investments offer the best option for jobs, growth, and wellbeing.

Energy efficiency in particular is widely seen as a hugely beneficial area for focus in the wake of Covid-19, due to the relatively fast pace with which such upgrade work can be undertaken, the near-guaranteed returns on investment that come from no-regrets energy saving measures, and the opportunities for low cost borrowing. Moreover, as Committee on Climate Change CEO Chris Stark has argued ahead of hotly-anticipated advice the independent body is due to deliver to the government next month, energy efficiency measures are often both "shovel-ready" and labour intensive, therefore creating opportunities for a swift economic boost.

But while investing in energy efficiency is increasingly attractive for manufactures to help future-proof their business and make savings in the journey towards net zero emissions, today's report also highlights a number barriers to wider take-up of emissions reduction measures.

Some 80 per cent of manufacturers' board directors and senior management staff are engaged in efficiency programmes, up from 50 per cent in the same survey last year, the study found. However, up-front capital costs for new green technology is still seen as an issue for manufacturers, with half of respondents lamenting insufficient return on investments or too-slow payback from some technologies. Meanwhile, access to government funding and grants is seen as challenging, exacerbated by a lack of clear advice on the government's various energy efficiency programmes, according to Make UK.

The trade body, alongside E.ON, is therefore calling for energy efficiency to be at the heart of a green recovery package, backed by more simplified government grants and fiscal incentives to support manufacturers' net zero investments. It is also calling on the energy sector to enhance its energy data monitoring and analysis, and urged all manufactures to place net zero targets and 'spend to save' investments in their own coronavirus recovery and resilience plans.

E.ON CEO Michael Lewis urged the government and the energy industry to work together to remove barriers to further investments from manufacturers in energy savings. "The Covid-19 crisis has demonstrated that collaboration and cooperation across government, industry and society can transform how our economy operates and we must now work together to deliver a green recovery which continues the transition to a low-carbon economy but also makes economic sense," he said.

A full recovery package or strategy has yet to emerge from the UK government, although last month Ministers reiterated their manifesto promise to allocate £9bn towards energy efficiency over the next decade. Last week the Prime Minister, Boris Johnson, also told MPs he would look to prioritise investment in low carbon infrastructure such as for electric vehicles and renewable energy as the economy restarts after lockdown, insisting his commitment to the UK's net zero target was "undiminished".

Responding to today's report, Energy and Clean Growth Minister Kwasi Kwarteng did not directly address Make UK's recommendations, but he welcomed the study's findings and reiterated the government's commitment to delivering net zero in the wake of Covid-19.

"We are committed to eliminating the UK's contribution to climate change by 2050, and manufacturers that have risen to this challenge now have a key role to play in ensuring a green and resilient economic recovery from Covid-19," he said. "Businesses putting sustainability at the heart of their operations are boosting profitability, productivity and helping to protect the environment. As we recover from the impact of Covid-19, we must lay the foundations for sustainable growth and a future net-zero economy."

Energy efficiency has long been seen as a crucial pillar of any credible net zero strategy for the UK, but has to date lacked a clear strategy backed up by sufficient funding to deliver the kind of major policy programme many businesses and analysts believe is necessary. But with the consensus growing around calls for a strong green stimulus programme to shore-up the struggling UK economy, today's findings from Britain's crucial manufacturing sector will add to the weight of evidence in favour of placing a revamped energy efficiency programme at the heart of the UK's recovery strategy.