Britain's manufacturers are today calling on the Government to
commit to cutting industrial energy costs as part of its
long-awaited Industrial Strategy, allowing manufacturing to grow
to its full potential and avoid a looming period of
de-industrialisation.
Make UK has made it clear that an ambitious and effective
industrial strategy is not optional. It is essential to ensuring
the UK remains competitive, secure, and economically productive
in the coming years. For that strategy to make the impact
manufacturers across Britain desperately need, it must address
the energy crisis that leaves firms at a massive competitive
disadvantage. With industrial energy prices four times those in
the US and 46% above the global average, the Government must act
now.
A new report, Tackling Industrial Energy Costs,
published today by Make UK sets out solutions which the
Government should place at the heart of the strategy, which are
both deliverable and costed. In particular it urges Government
urgently to reform the complex and unfair policy levies that make
low-carbon energy more expensive than fossil fuels.
These costly policy levies are currently applied only to UK
industrial bills and not across the rest of Europe. Making this
change would cut energy costs by 15% immediately. If coupled with
an agreed a fixed energy price for Britian's manufacturers, the
resulting cost reduction would be significant. Both sides would
take risk here. Government would pay manufacturers the difference
if the cost of energy went above the agreed “strike” price, with
manufacturers paying Government if the cost of energy fell lower
than the agreed fixed rate.
Make UK recommends that the electricity price £56/MWH which
equates to a 10% reduction in retail prices paid by
manufacturers. When the savings are added to those gained by
removing the policy levies from bills, UK manufacturers would be
on a par with European industrial energy bills.
Stephen Phipson, CEO Make UK said:
“If we do not address the issue of high industrial energy costs
in the UK as a priority, we risk the security of our country. We
will fail to attract investment in the manufacturing sector and
will rapidly enter a phase of renewed de-industrialisation.
UK manufacturers have faced energy prices far above those of
European competitors for many years, undermining their ability to
invest, grow, and compete globally.
More inaction risks compounding this disadvantage and forcing the
government to make difficult choices over costly bailouts) or
managed decline of the UK manufacturing sector.
Today we have set out a clear package of deliverable, sensible,
and popular policies to tackle this issue with the urgency it
requires.”
, Senior Vice President for
Manufacturing, Supply Chain and Purchasing AMIEO, Nissan Motor
Corp. said:
“The Nissan Sunderland manufacturing plant has the highest energy
costs of all Nissan plants across the globe. The proposals being
put forward by Make UK - under the umbrella of a new Industrial
Strategy - would send a strong message to investors that the UK
remains committed to creating a more competitive environment for
electric vehicle manufacturing.”
Read the full report here: https://drive.google.com/drive/folders/1T_5CL4YfuF_gY2W7rOfIOuHfxySTfpJq?usp=sharing
Make UK based the analysis on two pieces of published OBR
work. First, their assessment of the supply-side consequences
of changes in oil and gas prices (tailored to industrial
electricity prices), and second, their model of how the economic capital
stock adjusts to changes in corporation tax rates.The key
insights from this are that changes in electricity prices need to
be sustained to deliver lasting supply-side economic benefits,
and that those benefits, on the OBR's reckoning, reach their full
impact after eight years, with two-thirds of the effect felt
within five years (their forecast horizon).
Notes to editors
The policy levies which are recommended for
removal are those which add little value or have
already been superseded by different policy levies. They are the
Renewables Obligation (RO), Feed-in Tariffs (FiT), Capacity
Market and the Climate Change Levy (CCL).
Renewables Obligation: This is the biggest
policy costs UK manufacturers face. It is a legacy scheme that
closed to new capacity in 2017, having been replaced with the
more effective and efficient CfD framework. But it continues to
impose substantial costs on UK manufacturers' electricity bills.
Removing the RO from manufacturers' electricity bills would
provide immediate and significant cost relief
Feed-in Tariffs: Like the RO, the FiT scheme is
closed but continues to impose material costs. Manufacturers
derive no benefit from the FiT scheme, which mostly supports
domestic and small commercial rooftop generation.
Climate Change Levy: The CCL is a tax
explicitly designed to encourage energy efficiency and reduce
emissions. However, electricity is already subject to carbon
pricing under the UK ETS and Carbon Price Support, meaning the
CCL double-charges manufacturers for the same carbon. While some
industries already receive CCL relief via Climate Change
Agreements, many manufacturers do not. A targeted exemption for
UK manufacturing, or a re-design of the CCL to remove the charge
on electricity, would better align incentives.
Contract for Difference: Contract for Difference (CfD) was
established in 2014 to support the UK's journey to Net Zero and
is already a well-understood political mechanism.
