Manufacturers put energy challenge to Osbourne ahead of budget

Posted on 24 Feb 2014 by Callum Bentley

Britain’s manufacturers are calling on the Chancellor, George Osbourne, to mount an all-out attack on rising industrial energy prices in next month’s Budget.

The urgency to act comes amidst continued fears that the current escalating levels of energy prices are potentially diverting investment and threatening growth within the sector.

Manufacturing industry body, EEF, is leading the charge and has warned the impact of unilateral green energy taxes is hitting large and small businesses alike. The organisation backed its call by revealing new data from a forthcoming survey on reshoring that the cost of energy is now the aspect of the UK business environment that manufacturers are most negative about.

“The UK cannot afford to pile even more unilateral costs on the manufacturing sector, which is key to developing the UK’s longer-term growth and stability”

The survey of almost 300 companies shows that for half, government commitment to keep energy costs at or below the EU average would be the biggest single factor in encouraging more companies to expand their manufacturing activity in the UK.

EEF’s third annual executive survey of members also revealed that rising input costs is perceived to be the biggest threat to growth. Furthermore, the government’s own estimates show that by 2020 the costs of climate policy will be around 50% higher in the UK than the next closest country, Italy.

To help reduce the impact of green levies on business, EEF is calling on the Government to:

  • Freeze and then reduce the cost of the unilateral Carbon Price Floor– which was introduced last year as a tax on greenhouse gas pollution to encourage investment in low carbon generation. EEF estimates that the tax on its own will account for almost 10 per cent of a large industrial user’s electricity bill by the general election next year. Industrial consumers in Europe are already paying significantly less carbon tax compared to the UK.
  • Shield vital energy intensive industries, like steel and chemicals, from excessive UK energy policy costs by addressing the costs of the Renewables Obligation and Small Scale Feed in Tariffs which add an additional hefty 15 per cent to the bill of a steel company operating in a globally competitive market.
  • There should also be a commitment to extend all the measures in the current EII package for as long as is required, up to and possibly beyond 2020/21.

EEF Chief Executive, Terry Scuoler, said: “Rising energy costs represent a major threat to growth and could damage efforts to support and sustain long term recovery. The UK cannot afford to pile even more unilateral costs on the manufacturing sector, which is key to developing the UK’s longer-term growth and stability.

“Many manufacturers now feel that they are being severely penalised by high energy costs, some of which are being unilaterally imposed and, are not shared by competitor nations.

EEF is also calling on the Chancellor to address other areas in support of UK manufacturing, including measures on skills, funding for business support services and, improving access to funding, especially for smaller companies.