The impact of the energy crisis on the manufacturing industry from a corporate perspective

David Filmer
David Filmer

Published: October 26th, 2022

7 min read

The manufacturing industry in the U.K is currently worth approximately £52 billion and contributes more to the U.K economy than aerospace. With many manufacturing firms' production processes involving the use of extreme heat, and the transportation of tens of millions of tonnes of material, the manufacturing industry is currently struggling as a result of spiralling electricity and gas bills. The current energy crisis is forcing U.K manufacturers to consider whether to cut product production, or close their businesses altogether.

These external pressures may have consequences which impact on the industry at large, some of which we consider below:

Company restructures or group reorganisations

Large businesses with large amounts of assets in a company in their group structure may look to restructure their assets and move them into different companies to reduce the risk of one company in their group structure falling into administration.

Winding-up petitions

There will most likely be an increase in winding-up petitions being served on businesses who cannot pay their debts as and when they fall due and as a result of this, many businesses may be unable to weather the storm and may fall into administration or liquidation.

Increase in acquisitions of struggling businesses

Larger businesses who have good longstanding relationships with their bank and relatively stable profits will look to snap up failing businesses who are falling into administration by borrowing money from the bank. It is likely that the M&A market will see bidding wars between large corporations looking to grab a bargain deal on a failing business to bring into their portfolios.

Businesses disposing of company assets

As companies look to find ways to reduce risk and increase capital, there may be an increase in disposals of company assets from medium to large businesses.

Joint ventures

As the energy crisis continues to wreak havoc across the manufacturing industry, manufacturers are working tirelessly to find ways to reduce consumption and make their business more energy efficient to save money. Some manufacturing firms who are forward thinking may look to enter into a joint venture with energy data companies whose sole focus is to provide data to business to help them reduce waste, save money and reduce carbon emissions.

Increase in offshore acquisitions

Other countries such as Germany have seen an increase in offshore manufacturing production as the energy prices in Germany continue to soar. Some U.K enterprises may follow suit and look to purchase land or company assets aboard in places such as China, Pakistan or India with a view to reduce energy costs.

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