Welcome to Forbes’ quarterly Manufacturing & Engineering Sector eNews.

This month, our Manufacturing sector eNews focusses on the energy crisis – the latest in a long line of economic factors causing difficulties for manufactures.  It’s reassuring to see how much resilience and strength businesses continue to show at these challenging times and particularly amongst our client base.

  John Pickervance
  Partner, Head of Commercial
  T: 07976 25777 
  E: John.pickervance@forbessolicitors.co.uk

Cost of living crisis: what can employers do?

With the cost-of-living skyrocketing in recent months, the pressure of the cost-of-living crisis has become inescapable. As household bills rise and budgets tighten, flexible working is becoming increasingly important for many employees across the UK. 

It is crucial now more than ever, that employers look at ways in which they can support their employees through this crisis. Whilst many employers may look to increase pay in line with the Living wage, or offer Salary Sacrifice schemes as cost saving solutions, where employers are unable to keep up with the soaring inflation rates, they may need to look at alternative ways in which they can help their staff.

Inflation and the cost of manufacturing crisis  

The manufacturing industry is unable to ignore the current cost of living crisis throughout the UK. The rise in material costs is being felt more than ever, with the impact of Brexit, the coronavirus pandemic, the war in Ukraine and now inflation.

Inflation is currently at a record high of 10.1% and the Bank of England expect the rate of inflation to continue to rise, sending nervous ripples through an industry which is already struggling with reduced levels of new work and demand.

Such rising costs are likely to be a prominent issue for many in the sector but particularly those in long term contracts and those where the price has been fixed from the onset, as many manufacturers will be unable to absorb the increase in costs alone and will have to explore passing those costs onto the consumer to stay afloat.

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

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.

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.

Product Regulation Strategy 2022 - 2025

On 31 August 2022, the Office for Product Safety and Standards ("OPSS"), the UK's product regulator, published its Product Regulation Strategy 2022 - 2025 which aims to modernise the UK's regulatory framework to protect customers, the environment and bring it up to date with modern markets, which will consequently have an effect on the way that manufacturers continue their operations.

The Strategy first considers product regulation in light of the UK's objective to achieve net-zero by 2050. OPSS makes a number of observations on how a change in product regulation may help to achieve this target, including by supporting businesses in moving towards more environmentally friendly sources of production and distribution, supporting product repair, reuse and recycling and improving the sustainability of operations.

Additionally, product regulations will need to be updated in line with the changing markets (e.g. the growth in online sales), supply chain disruptions and the associated cost of living pressures. OPSS is looking to establish an approach that is proportionate, innovative and forward thinking that looks to protect consumers from unsafe goods.

Update your product safety markings by 31 December 2022

Manufacturers should be aware that the UK Conformity Assessed mark will apply to certain products for sale on the UK market from 31 December 2022, until which point the existing CE mark will continue to apply on the UK market.  In the case where products are imported for further manufacturer or processing in the UK, the manufacturer will have the sole and ultimate responsibility for ensuring that it is UKCA compliant before it is placed on the market from 11pm on 31 December 2022. 

Commercial Property - Energy Focus

The huge increase in energy costs combined with global threats to energy security have encouraged many businesses to focus on improving the environmental performance and energy efficiency of their buildings. Such improvements may extend from relatively minor works such as the installation of energy efficient lighting, through improvements to insulation and heating systems, up to significant renewable energy projects such as the installation of wind turbines or solar panels. 

 The adoption of such measures becomes more complicated with regard   to commercial property that is leased to a tenant. The tenant may only   have a relatively short term interest in the property and therefore be   reluctant to incur costs for improvements that may only pay off over the   longer term, whereas there may be no immediate benefit to the landlord   as any improvements in energy efficiency may only benefit the tenant   through lower energy costs in the short term (as in the vast majority of leases the tenant will be responsible for the cost of utilities consumed in the property).

Moving in the right direction - business travel to and from the EU in a post-Brexit world

Following the end of the Brexit transition period on 31 December 2020, freedom of movement to the European Union (EU), EU directives and regulations no longer apply to UK citizens and service providers.

Many businesses are seeing the impact of these changes in practice and many clients are asking what this means for business travel into the UK and into the EU.

We have worked with a number of clients providing advice on business travel requirements for employees travelling to the EU and also for EEA employees coming to the UK. It is important to keep up to date with the requirements and plan ahead of employees travelling to or from the EU to the UK to ensure that they are complying with immigration rules and will not be stopped at the border.