Riteweld Engineering builds the skeletons for the modern economy.
In her Banbury business, she takes steel bars, cutting, welding, and drilling to create frames for warehouses, shops, and restaurants.
It buys steel by the ton, but in recent weeks it has seen unprecedented fluctuations in the prices of raw materials, due to the global rise in natural gas prices. This means that the quote given at breakfast is outdated by tea time.
« We could take the phone to a supplier in the morning and by the afternoon we could have seen a £20 per ton increase in cost, » says manager Ben Young.
He says quotes from suppliers are now only good for a day, and contracts agreed months ago can now only be completed at a loss.
“When I quote a quote for a client, I say I can only keep it for a few days because the supplier I deal with will not keep their cost for more than a number of hours, and when I come back to place my order, before I process it through the design office, the price has gone up again.”
The result is a slowdown in business that may get worse.
He added, « Now we’re finding a little bit of uncertainty, clients say maybe I’ll put off and leave this building until the new year. Right now we’re fine, but for us it’s the uncertainty that’s the problem. »
Companies like Riteweld are suffering because of the challenge to the supply chain, as energy-intensive industries such as steel, paper, chemical production, and ceramics become unviable due to energy costs.
Natural gas prices are about six times higher than they were last year, which puts a premium on electricity during the fall when calm weather reduces renewable power generation.
And unlike domestic customers who are partially protected from price hikes by a cap that is renewed twice a year, there is no limit on industrial use.
Energy-intensive industry leaders spent Friday and most of Monday in talks with ministers and officials, warning that factory closures and even permanent closures are a very real possibility.
Government sources say ministers believe the warnings are stark and credible, and not just private pleas on behalf of companies under pressure. The basic calculation is that those asking were competitive, self-sufficient companies until a month ago, when price hikes skewed their financial model.
What to do about it is a more complex and costly question, and it may explain the awkward and notable weekend feud between Kwasi Kwarting and Rishi Sunak.
In short, a Treasury source accused the business secretary of lying when he said talks were underway on how to help the industry. A day later, sources confirmed there was an « official request » for help from the Treasury.
Mr. Sunak’s reluctance to tell you that whatever it takes, it will be costly. The industry has proposed a series of « winter containment measures », which provide support for higher short-term bills.
But it also wants the Treasury to deal with the additional costs, many of which are linked to the climate, and which it says make energy costs for British companies 80% more expensive than German rivals.
« It’s not about supporting our industry, » said Gareth Steess of UK Steel industrial group. “It’s about putting us on a level playing field with Germany. The government is accumulating the costs of fines, renewables, transmission, distribution, capacity, and carbon costs that our competitors bear directly that our competitors do not.
« We’ve said for years that they need to solve this to make us competitive and then we can hire more people and give more to taxpayers. »
With the UK hosting the COP26 climate summit in three weeks’ time and the government committed to a transition to renewable energy, it seems a delusion to think that Mr Sunak – or the prime minister watching from a Spanish bed – would agree to a fundamental reform of carbon-related costs.
The best the industry could hope for is a copy of the short-term support provided to CF Industries, the carbon dioxide manufacturer that shut down when high energy costs made fertilizer production unviable.
That support ends on Tuesday, with carbon dioxide suppliers agreeing to take on the increased cost of production until the new year.
These costs, like many of those likely to increase in Britain’s looming long winter of supply chain and power disruptions, are likely to ultimately be borne by the consumer.
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