A manufacturer’s ability to compete is directly tied to its energy costs, according to Liam Conway, Co-founder of Greenfields Energy Group, which advises businesses on energy procurement.

“You could have a scenario where a manufacturer’s pricing is completely out compared to a local competitor, purely because that rival is being more strategic about its energy,” says Conway.

Paying the lowest possible price for energy isn’t necessarily the aim, he explains; it’s hard to achieve. He says: “What really concerns them is whether their own pricing is wildly out of kilter with the rest of the UK market. That goes double when it comes to competing on the world stage.”

Energy is a long-term asset

Global events make this situation worse. In the energy crisis created by the war in Ukraine, Conway says, some UK manufacturers had already protected costs by pinning down favourable contracts or buying volume ahead of time. That gave them a huge advantage over rivals that were more exposed to market volatility.

Conway points to the new crisis stemming from Iran. The impacts to businesses with contracts due in the next couple of months will be much more severe than for firms with contracts starting sometime between 2027 and 2029, he explains.

“One of my clients likened their energy strategy to an asset on their balance sheet. They’re right: if you’ve got a long-term, stable cost plan all mapped out, it’s an operational asset that enables you to work profitably as a business.”

Four steps to take

So, what should a proactive approach to energy strategy look like? Conway advises manufacturers to follow these crucial steps:

Leicester-based manufacturer Michael Smith Switchgear Limited attached 284 solar panels to its roof five years ago. For Conway, owners’ decision-making around such projects should always account for the suitability of their premises. “If you’ve got a fairly decrepit site and would need to spend, say, £250,000 on a new roof, that will affect the feasibility.”

Consider getting a broker – but watch out for cowboys

Conway recommends getting an energy adviser or broker to do the legwork that manufacturers often don’t have time to do, but with one caveat. Conway cites cases where companies were pushed into signing long-term fixed contracts at the worst possible time, because the brokers could make money from it.

He warns: “Lots of energy brokers out there are basically glorified call centres – real Wolf of Wall Street stuff – and whether or not it’s a good time to sign a contract doesn’t matter a jot to them if they get to ring a bell and put a number on the whiteboard.”

Some brokers may harass potential clients with phone calls and say whatever they need to in order to get the contract. Brokers can also have their own deals with specific energy providers to bring in a set number of customers in a certain timeframe for an upfront fee.

As such, Conway urges manufacturers to check that brokers and advisers have eyes on as much of the market as possible. “Carefully assess the contract structures that brokers are presenting, pay keen attention to the underlying terms and conditions – and always bear in mind your own cost and risk appetites.”