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One of the UK’s oldest family-owned companies has praised the government’s decision to include forges in its energy subsidy scheme for manufacturers, forecasting savings of up to £250,000 a year on its fixed energy costs.
Somers Forge, which is based in the Black Country and has been owned by the Folkes family since 1697, supplies vital parts for naval vessels including nuclear submarines. The firm, part of the country’s defence manufacturing chain, was recently included in the British Industrial Competitiveness Scheme (BICS), which waives the obligation to fully pay three of the five levies imposed on UK manufacturers.
Tammy Inglis, the finance director of Somers, said it was “absolutely brilliant” to see forges included in the scheme. “Over a five-year period, we were going to expense an extra £1.1 million on that one-line cost. Now, because we are going to be saving a lot of that and a proportion of other renewable surcharges, we’re going to save around £200,000 to £250,000 per year from our fixed costs on energy,” she said.
The scheme was announced in June last year, promising to cut electricity costs by up to £40 per megawatt hour for more than 7,000 energy-intensive users such as automotive, aerospace and chemicals makers, by reducing what eligible firms pay towards the renewables obligation, capacity market and feed-in tariff from 2027. However, the industry code for businesses classed under forging, pressing and stamping of metal was initially left out.
Last month the government updated the criteria for BICS to include forges, after lobbying from groups such as the Confederation of British Metalforming. This month it published the final list of eligible activities and launched an eligibility checker so firms were aware they could claim.
Jonathan Reynolds, the business secretary, told The Times: “By making sure every eligible business in the country knows how to access the support they need, our Modern Industrial Strategy will help power Britain’s future and unlock good growth in every corner of the country.”
The support comes as energy prices continue to squeeze the firm, which celebrates the 160th anniversary of its engineering division this October. Inglis said the company was paying around 45 pence per therm, a unit of heat, in 2018, but the price has since risen to as much as £1.65. Somers now spends as much as 10 per cent of its turnover on energy bills.
“I’m getting to the stage … where I’ve got to start putting surcharges on customers, because it’s just a low profit,” she said.
Inglis previously told The Times that the company was struggling to compete with European rivals because of energy costs. She said the scheme will “definitely” help the firm compete in Europe, although energy prices still feed into the cost of other commodities the business buys, such as steel.
The wider strain on companies was underlined last week by the Red Flag report from BTG, a management consultancy, which found more than 53,000 British businesses at risk of collapse and a 9 per cent year-on-year jump in companies in critical financial distress. BTG warned of the impact of higher inflation and energy prices.
Stephen Morley, the president of the Confederation of British Metalforming, an association that represents 200 companies, said the changes mean that between 70 and 80 per cent of his members are now eligible for the scheme. The GMB union has separately criticised the exclusion of ceramics and brickmaking businesses from the support.
Morley welcomed the change for metalformers but said the “staggering price of energy in the UK remains at the forefront of industry’s mind”, creating an “unfair playing field for our firms trying to compete globally”. He said German companies complain about energy “until they realise our costs are 60 per cent higher”.
He urged the prime minister to go further. “BICS is a start, but it shouldn’t be the end … Burnham and his team have an opportunity to redraw the energy lines and give manufacturers the conditions to grow and create jobs,” Morley said.
