Energy-intensive Industries

Wednesday 6th July 2022 Westminster Hall

11:00

[Judith Cummins (Bradford South) (Lab)]

I beg to move,

That this House has considered support for energy intensive industries.

It is a pleasure to serve under your chairmanship, Mr Stringer. I am grateful that we have the opportunity to address the mounting problems currently facing energy-intensive industries. Over the past few months there has been increasing concern—turning to panic—about the energy crisis and the huge rises in gas and electricity bills. Households and families are struggling, as are many of our businesses.

As we all do in this place, I spend a significant amount of time in conversation with businesses and workers in my constituency and across the country, hearing about their concerns, anxieties and plans for the next few months and years. Those industries are the lifeblood of our economy, and those workers are the beating heart of this country’s wealth, growth, production and potential. Energy-intensive industries, such as steel, food manufacturing, chemicals and building materials, are fundamental to our economy. Those industries tell me, time and again, about rising energy prices. I am aware of case after case of businesses, having survived a very difficult few years during the pandemic, being brought to their knees by eyewatering energy prices.

[Ms Marie Rimmer (St Helens South and Whiston) (Lab)]

I thank my hon. Friend for securing the debate. Once energy-intensive industries are gone, it is very hard to get them back. Does she agree that the Government need to support our energy-intensive businesses, as other countries are doing, before it is too late?

[Judith Cummins]

I absolutely agree; these industries are fundamental to the future of our economy. The Minister can imagine my dismay when I raised one of the cases from my constituency with the Minister for Energy, Clean Growth and Climate Change, the right hon. Member for Chelsea and Fulham (Greg Hands), at Business, Energy and Industrial Strategy questions on 7 June, and I was told that my example was just an “extreme” case. Therefore, presumably, it was not worth his time addressing. The case in question is an energy-intensive business in my constituency, whose energy bills have risen from £7 million to £35 million. However, that is not an extreme case. In fact, industry after industry have been warning for months about the impending problems, and raising the alarm on the dire situation they now find themselves in.

[Mike Amesbury (Weaver Vale) (Lab)]

One such industry is in my constituency, Tata Chemicals Europe. The managing director has fed back to me exactly your concerns; it is a real live issue across the country.

[Judith Cummins]

My hon. Friend is absolutely right that it is a national problem and needs a response from the UK Government. Almost all industries are feeling the effects of soaring energy prices. However, for some industries, such as chemicals, steel, ceramics, cement and shipping, it is their extreme energy intensity and the singularity of their outputs that make it nearly impossible for them to react to energy price fluctuations. Those energy-intensive industries face a unique set of challenges that need to be addressed directly by the Government or they will face significant job cuts, lost investment and, ultimately, factories closing. There are good jobs at risk here.

If that seems too extreme for the Minister, he should know that Make UK, which represents Britain’s manufacturing industry, has made it clear that more than two thirds of companies claim that rising energy costs are causing “catastrophic” or “major” disruption to their businesses. Make UK has said that eyewatering energy costs have become “a matter of survival” and has called on Ministers to do “whatever it takes” to support businesses and protect jobs. Without that, they face pushing these essential industries closer to breaking point.

The UK’s glass industry also faces an increasingly challenging position. With energy prices tripling and gas bills quadrupling, the glass industry has repeatedly asked the Government to recognise the unbearable pressure these prices have placed on an industry that is so vital to the UK. It needs support—any support—because price hikes are putting UK glass manufacturers at a competitive disadvantage, risking undoing the hard work on decarbonisation, quashing inward investment and, ultimately, passing on a rise in prices to consumers at a time when we all know that inflation is already ballooning out of control.

While the Government continue to bury their head in the sand, it is working people who will pay the price and suffer. British Glass states that

“without firm action to address the industrial energy crisis, we risk…loss of employment across the north of England.”

I say to the Minister, this is not levelling up; this is the Government playing fast and loose with other people’s jobs.

The Government’s own figures, laid out in the latest energy price comparisons, reveal that industrial electricity prices in the UK are significantly higher compared with the rest of Europe, and indeed the world, with extra-large consumers facing prices 40% above the median of the EU14. It is worth noting that under the coalition Government, BEIS used to publish annual energy prices and bill impact reports, but that has been stopped. Minister, will you outline when those reports will be reinstated?

The energy White Paper in 2020 called for

“a strategic dialogue between government, consumers and industry on affordability and fairness”,

but that has not happened yet. Will the Minister update me on any progress in those conversations?

The petrochemical group INEOS has also warned that British manufacturing is now under serious threat from competing regions, such as the US, because of high energy costs. It cites our producers facing gas prices seven times higher than the levels paid by US competitors. To put the size of the problem into perspective, INOVYN, a chlorine manufacturer operating in Runcorn, on the banks of the Mersey, uses as much electricity as the nearby city of Liverpool.

However, the problem is not new. Last year, UK Steel published its report into the huge structural barriers it faces because of out-of-control energy prices.

[Dr Dan Poulter (Central Suffolk and North Ipswich) (Con)]

The hon. Lady is making some very good points and I congratulate her on securing the debate. She is right to highlight the challenges faced by manufacturing business. Does she recognise, as I do, that rural businesses, including smaller rural businesses, are often reliant on oil for their heating? They face a quadrupling, or worse, in the cost of the oil to heat the buildings in which they operate and their staff work. Will she join me in asking the Minister to look not just at oil for heating homes, but specifically at the oil that businesses in rural areas depend on to heat offices, and to come up with a solution to support those businesses?

[Judith Cummins]

I absolutely agree with the hon. Member about the importance of all businesses needing support at this perilous time.

Last year, the Government declared that they were

“firmly committed to ensuring the UK continues to be one of the best locations in the world”

for car manufacturing. Fast forward to June 2022 and the Society of Motor Manufacturers and Traders has seen its energy prices surge by 50% in a single year and is facing a £90 million hike or the equivalent of 2,500 jobs.

Nissan has contacted me to make clear that the viability of its £1 billion investment in British projects is on the line because its energy costs have risen almost 150% beyond expectations. I remind the Minister that the car industry delivers £5.7 billion into the economy every year. This vital sector, which contains multiple industries—some of which the Government have deemed energy intensive, and some of which they will not—cannot and should not be left to falter. Some 22,000 jobs are on the line, when it comes to our transition to battery-powered cars, and with manufacturers currently making decisions about where to invest, the Government are demonstrating that they cannot be trusted to make energy-conscious decisions for energy-intensive businesses.

Energy security is equally essential for energy-intensive industries. While British businesses are paying through the nose for gas, electricity and oil, the Government cannot even guarantee that the lights will be kept on this winter. The Government describe such suggestions as alarmist, but it is their own modelling that suggests that, due to shortages, 6 million homes could face power cuts this winter, and heavy industrial users of gas—including gas-fired power stations, which are essential to our electricity production—could be told to stop production. The Government have failed time and again to get this right. Quite frankly, it is shocking and completely unacceptable that they have mismanaged the situation to such an extent that their own modelling cannot guarantee a consistent energy supply for industries this winter.

This was all foreseeable and foreseen. In September 2021, I raised the flag that the Government’s decision to disinvest from gas storage was a mistake, but the Government chose not to listen. The Business Secretary told me that we are less reliant on storage than our European neighbours, and we could simply rely on our diversified energy portfolio, including 30% of our natural gas coming direct from Norway. Well, that comment has not aged well. Yesterday, the Financial Times revealed that Norway’s state-owned pipeline could stop totally, with shut-off as soon as this weekend—a crisis only narrowly averted by the Norwegian Government’s intervention late last night. This all highlights the complete instability of our energy supply and the energy situation. During the biggest energy price crisis in living memory, the UK has more gas than we know what to do with, but we cannot store it in readiness for a difficult and harsh winter, leaving us in the maddening crisis of wasted gas resources and extortionate energy bills.

Months after dismissing my concerns and those of energy-intensive industry leaders and trade unions, the Government are left scrambling to find an emergency solution to secure extra energy supplies ahead of this winter. Centrica has announced that it is in exploratory discussions with the UK Government about reopening Rough, which closed in 2017 and was Britain’s largest gas storage facility. Will the Minister outline exactly what the plan is for gas storage in the UK? Will he address Rough, in particular, and timescales, so that we can be reassured of getting through the harsh winter?

Against the backdrop of high energy bills, strategically important energy-intensive industries need proper support to protect our economy and workers’ jobs and to keep our country’s energy supply secure. Baker and Baker, a leading European manufacturer of bakery products, headquartered in the UK and with hundreds of employees in my constituency, is a high energy-intensive industry, which has invested widely in state-of-the-art equipment to stay competitive. Its energy costs have increased by almost 200% in a single year, which has a significant impact on its business and a knock-on effect of increasing the prices that customers pay for products at all our major supermarkets.

The Government’s energy-intensive industries compensation scheme, which was extended at the end of April, was a welcome step to alleviate some of the electricity costs that those industries face, but they must do more. The scale of the challenge demands Government intervention to support the industries. Both the Chemical Industries Association and the Society of Motor Manufacturers and Traders have cautioned the Government that the prolonged energy costs that they face could see factories reducing operations and foreign firms taking their business elsewhere.

The Government must act now to support these businesses and protect British jobs and British production. The longer this goes on, the higher the risk to those industries and our economy, but also to our national security. Businesses face a 500% increase in wholesale gas prices, which is completely in line with the fivefold increase to energy prices in my constituency. UK Glass faces a quadrupling of energy costs through gas prices. Car manufactures face a £90 million spike, or worse, with Nissan facing a 150% increase. UK energy prices are 40% higher than those of competitors when it comes to extra-large consumers. These examples are not extreme; they are the reality for British businesses.

Will the Government introduce a proper pack of measures to support energy-intensive industries? Can the Minister outline what those measures would be and when they will be available? We need to ensure that there is a level playing field for British businesses and industries to survive, let alone compete. Finally, can the Minister guarantee that no energy-intensive business will be left in the dark because of energy supply issues this winter or allowed to fail because of the astronomical energy costs? That would be a disaster.

Minister, to put it simply: the Government need a plan. What is it and where is it?

11:16

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Lee Rowley)]

It is a pleasure to serve under your chairmanship, Mr Stringer. I am grateful to the hon. Member for Bradford South (Judith Cummins) for calling this debate today. It is an important issue and it is right that we debate it in the detail and depth it deserves. I recognise how important this issue is in many parts of the country, both from the perspective of my constituency and from being a Minister for the past 10 months. I know that there are hon. Members, both present and not in attendance, who have a very extensive interest in this and are very concerned about the challenges— which we hope are temporary—that the industry faces. We recognise those challenges.

First, lest it be suggested otherwise—I am sure that is not the intention of the hon. Lady—I want to say that energy-intensive industries are important to the United Kingdom and important to the UK Government. They are important because they provide resilience within our supply chains over the long term; are representative of British manufacturing and the fantastic things it does; and provide a historic link to our past and our proud energy and manufacturing background.

That importance is why I have spent much of my time as a Minister over the past 10 months talking to our energy-intensive industries. I speak almost weekly with at least one representative—sometimes more—from the energy-intensive industries. I have been on regular visits, including to glass factories in the north-west, paper mills in the east midlands, steel factories in Wales—the UK Steel representatives in the Public Gallery are very welcome—and chemical factories in Teesside. Over the past 10 months, I hope that I, as Minister, have demonstrated to the industries that I am interested in hearing their views—views that the hon. Member for Bradford South has articulated—and in engaging in open dialogue.

We want to understand the industries’ concerns and issues and to work through them in a careful, calmed and reasonable process—in the way that public policy should be created—to work out what is reasonable and proportionate. We discussed the issues on Monday in one of our regular UK steel discussions with unions and companies representing the industry. At those meetings, we come together and have exactly the kind of strategic dialogue that the hon. Member for Bradford South was talking about. The Government will continue to do that in the coming months. I want to make very clear that energy-intensive industries are important in terms of what has been done, and we need to ensure that they are listened to and heard on an ongoing basis.

I want to be clear that there is a challenge. When I speak to colleagues, including my hon. Friends the Members for Scunthorpe (Holly Mumby-Croft) and for Stoke-on-Trent South (Jack Brereton), and Opposition Members who feel just as strongly, I know how important it is that we acknowledge that there are difficulties. There are global difficulties because of unprecedented circumstances—we all accept that—which we did not anticipate. It is very difficult to anticipate the first invasion of a sovereign country on European soil for 70 years, which is what Putin did. It is difficult to anticipate the price spikes and the volatility in the market that comes from that. That is not something that can be easily managed away, but none the less it has caused issues for a number of energy-intensive industries as well as the wider sector. The Government are working through how they can support that.

We recognise that this follows a number of years where energy-intensive industries have been clear that while the Government have brought forward support, undertaken dialogue and are doing what they can, there is a price differential compared with Europe, and we understand that. That is one reason why we brought forward the British energy security strategy in April. It includes many elements, addresses the long-term approach to energy and indicates our continuing support for industry.

[Jack Brereton (Stoke-on-Trent South) (Con)]

The ceramics industry in Stoke-on-Trent has been incredibly successful since the Conservatives came to power. We have virtually doubled gross value added. However, we now face serious challenges, particularly because of energy costs. Most or all of the ceramics industry has not been eligible for Government support because most of the industry is too small and many of the NACE codes do not qualify. Does my hon. Friend agree that there must be a level playing field and we must address this issue to ensure that support in place for the ceramics industry?

[Lee Rowley]

My hon. Friend is an absolute champion of the ceramics industry, and I know how important it is for his constituency. As he indicates, it has been a real success story for our country, and we want to ensure that it continues to be a success story. His advocacy in this place is absolutely the way to ensure that that happens. We accept that there is a challenge—there is no question of that. Over recent months, the Government have acknowledged that challenge in papers such as the British energy security strategy, which is important and has been welcomed by a number of industries as part of our ongoing dialogue, and have started doing things to address it.

I am glad the hon. Member for Bradford South has acknowledged and welcomed the compensation scheme. It is not something to quickly pass over; it is a substantial increase in money—if that is the yardstick we are using. It is substantial confirmation that we are serious about supporting our energy-intensive industries. From the extensive conversations I have had with colleagues in this place and with the industries themselves, the changes coming from that have been welcomed. When people say, “The Government need to do something”, the Government have done something.

The energy security strategy is clear that there will be a further consultation on a further element of what we are seeking to do, and I expect that to begin shortly. We are considering using that strategic dialogue, which the hon. Lady indicated is important, about what else is reasonable and proportionate to do over a longer period of time. None of these issues is straightforward or has a simple solution; otherwise, this Government or previous ones, including the Labour Government pre-2010, would have done it. It is a difficult and challenging problem and we need to do something about it, as the Government have done, and look at what can be done in the future.

I will address a few of the hon. Lady’s points. Unless we contextualise this conversation and conduct it in a reasonable manner, it will go off in all sorts of directions that are ultimately unhelpful. I understand that ultimately it is for other people to choose their words, focuses and emphases, but there has been progress on this agenda in recent months and that should be acknowledged. It is recognised that the Government are absolutely serious about supporting these industries.

[Judith Cummins]

I take that as some kind of criticism of my words, many of which were given to me to represent British industrial businesses. We have heard so much from the Minister about the difficulty, accepting that there is a challenge and listening, but he needs to act because British businesses and energy-intensive businesses are suffering and crying out for more help.

[Lee Rowley]

Those are exactly the kinds of statements that I think, with the greatest of respect, are not entirely helpful. The Government have acted, and it should be acknowledged that we have done so. Hundreds of millions of pounds have been brought forward in recent weeks, which should be acknowledged as a significant step forward. As I have already said during the past 10 minutes, we accept there is a challenge, and we are going to do more. We have already committed to bringing forward at least one additional consultation—

[Judith Cummins]

rose—

[Lee Rowley]

I am happy for the hon. Member for Bradford South to take some of my time. What exactly should we do?

[Judith Cummins]

I am happy to take up some of the Minister’s time. Shall I repeat the eight questions that I asked in my speech that he has not—[Interruption.]

[Graham Stringer (in the Chair)]

Order. Interventions should be brief and to the point. It is not a dialogue.

[Judith Cummins]

I am happy to send the Minister a copy of the eight questions I asked him in my speech. He is yet to address a single one of them.

[Lee Rowley]

The challenge with this debate is that we all accept there is a problem, and we all accept that there is a wider context of global issues—some of which are beyond our control—but ultimately, the hon. Lady needs to propose as well as oppose. If she has a proposition, I would be very happy to hear it, as would the Government, but I did not hear a proposition in the 20 minutes that she spoke for.

“Do more” needs to be followed by another sentence that says precisely what to do, because when you talk to energy-intensive industries—I am not suggesting that the hon. Lady does not—and have detailed dialogue with them, you realise that there is a significant amount of nuance underlying this discussion. As my hon. Friend the Member for Stoke-on-Trent South has outlined, you have some energy-intensive industries that are very heavily based on gas. You have other energy-intensive industries that are very heavily based on electricity, as my hon. Friend the Member for Central Suffolk and North Ipswich (Dr Poulter) has indicated. Other businesses that are not energy-intensive industries are also reliant on some unusual ways of procuring and using energy, and if we do not recognise that nuance in any solutions that we propose, ultimately—

[Graham Stringer (in the Chair)]

Order. I have let it go so far, but I do not have views on these things when I am in the Chair. The hon. Gentleman is not the only Member who has transgressed that rule during the debate, but can he refer to hon. Members, not “you”?

[Lee Rowley]

My apologies for not using the correct nomenclature, Mr Stringer.

The point I am making is that there is a variety of nuances underlying this discussion. We have energy-intensive industries that are heavily dependent on one source of fuel, and energy-intensive industries that are heavily dependent on another. We have some industries that are very heavily hedged and some that are not. We have some differences when it comes to the significance of the change in energy costs. We have some industries that are within the compensation scheme, and some that are without it. Some are in other schemes, and some have already applied for schemes that are already open, including the industrial energy transformation fund, which is another £300 million of Government funding—of taxpayer subsidy—to help the sector.

The point I am making to the hon. Member for Bradford South is not that there is not a challenge—I have repeatedly indicated that there is. It is not that we do not value energy-intensive industries, nor that I do not want to listen, and I accept that she is acting completely in good faith in trying to record and highlight the challenges that energy-intensive industries in her constituency face. However, the question is exactly what we do about it, and that strategic dialogue is under way at the moment.

[Mike Amesbury]

CF Fertilisers, which employs many people from my constituency of Weaver Vale, is located in the constituency of my hon. Friend the Member for Ellesmere Port and Neston (Justin Madders) and also has many employees there. Over 300 of those people now face losing their jobs. I know there have been discussions with a consortium that has come forward and some reference to a bridging loan, but that would require some intervention, hopefully from the Government, with a potential purchase. It may be beyond the scope of today’s discussion, but I would be interested to know how that is progressing.

[Lee Rowley]

I thank the hon. Gentleman for his intervention. I know that this matter is important to employees at the Ince factory, just as it is important to those at the Billingham factory. I have 50 seconds left of my speech, so I am afraid I cannot address that issue directly, but the hon. Gentleman has absolutely made his point and has been clear about the implications for that locality.

In the few moments I have to sum up, the key point I want to make is not that the Government do not agree there is a challenge, or that we do not think energy-intensive industries are valuable to the United Kingdom—they absolutely are. The point I am trying to highlight is that we are talking to those industries in a careful, calm and methodical manner, working out all the nuances and differences that underlie this issue, and seeking to determine how, over time, we can bring forward solutions that work for the long term. However, we must also recognise that £2 billion in support has been provided since 2013, and that we have done much in recent weeks, too.

Motion lapsed (Standing Order No. 10(6)).

11:30

Sitting suspended.