Packaging Industry

Baroness Burt of Solihull Excerpts

Tuesday 5th July 2011 Westminster Hall

[Mark Pawsey]

I shall speak later about some of the industry’s innovations in response to the pressures, and my hon. Friend gives a great example.

Given those concerns, I turn to matters to do with the environment and energy costs. I understand that many of them are not the direct responsibility of the Minister’s Department, but I am sure that he will appreciate the concerns of this important manufacturing sector. Given the challenges faced by industry more generally, manufacturing has been and continues to be an important part of the UK economy, adding £140 billion per annum to the economy and providing 2.5 million jobs, but it has been badly affected over the past 10 or 15 years and particularly by the recent recession. He will be aware that industry generally considers it vital to provide the right conditions to ensure that manufacturing can succeed in a globally competitive environment. It is important that the Government deal with the barriers that businesses face, such as finance, regulation, tax and skills.

Despite the recent slow-down in global growth, the world economy is predicted to double in size over the next two decades, with massive growth in emerging markets such as China and India. It is important that the UK’s manufacturing sector is able to take advantage of such opportunities. The good news is that manufacturing output rose by 1.3% in April and that, in 2010, manufacturing output grew by 3.6%—the fastest since 1994. The Government place a high priority on helping manufacturing firms to invest, and they have cut the main rate of corporation tax to 26% and the small profits rate to 20%.

In addition to encouraging investment, industry needs new recruits. We need to encourage school leavers to consider a career manufacturing. In many ways, that will require a change in culture, as we must give an incentive to school leavers to consider manufacturing. The UK skills shortage is recognised by Proskills UK’s chief executive, Terry Watts. He said that the skills shortage in the manufacturing sector is costing the UK £118 million in lost productivity. He also said that the Government should

“do more to espouse the whole of manufacturing, and not just the high profile industries.”

We should also consider the process industries that are not as high-profile as manufacturing, recognising that industries such as packaging are fundamental to the development of the whole economy.

The Government take the skills shortage seriously. Addressing the shortage means increasing the number of apprenticeships and technical training opportunities. In a positive move, the Government have said that they will fund an additional 80,000 work experience places for young people and expand the programme of universities and technical colleges.

[Lorely Burt (Solihull) (LD)]

I agree with what my hon. Friend says about the need to increase young people’s awareness of the opportunities that exist in manufacturing. Does he agree that we need to shake up the image that the careers service has of manufacturing? I am talking about the idea that engineering is an oily rag type profession. The service should lay before our young people all the potential that manufacturing offers as a career.

[Mark Pawsey]

My hon. Friend makes a good point about the image of engineering. As west midlands MPs, we both know the importance of engineering. As a father of children who have recently gone through school, I recognise that the case for going into industry and getting involved in manufacturing has not been put sufficiently strongly by the careers service. We want to change that attitude in the hope that some of those bright young people who are coming from the technical colleges will find their way into the packaging industry, whether through design and innovation or through their input to the manufacturing process.

Let me turn now to the challenge of competing in world markets and energy costs. The production of packaging—the process by which paper, board, glass and metals are manufactured—is energy intensive, and the energy agenda affects the packaging industry and packaging manufacturers disproportionately. The packaging industry produces large volumes of low-value items. The cost of a box, can or bottle is measured in pence per item and the cost of a bag measured in points of a penny per item. A significant increase in energy costs will have an impact on those items.

The Government aim to reduce carbon dioxide emissions to 50% of the 1990 level by 2027. The packaging industry fears that that objective, together with other plans, will put UK manufacturers at a greater disadvantage than those located elsewhere in the world. It feels that the UK expects too large a carbon reduction in too short a time.

The think-tank, Civitas, recently prepared a report on the effect of energy prices on the chemical industry; the effect on packaging would be pretty much the same. Civitas states:

“Britain is making the deepest emission reductions of any industrialised nation. The 2020 34% target is 14% higher than that of any other EU nation. The latest carbon budget now commits the UK to emission targets beyond 2020, the first country in the world to do so. To meet these over-ambitious targets, high unilateral costs are being imposed, such as the new carbon price floor. Taking all green levies into account, the average energy-intensive company’s energy bill is set to rise to £17.5 million by 2020 from the current £3 million.”

[Lorely Burt]

My hon. Friend is being very patient with me this morning. Is he aware of the National Industrial Symbiosis Programme, which works across industry, thinks outside the box and uses other firms’ waste and by-products? Since April 2006, its 12,500 members have reduced by 7 million tonnes the waste that would have gone to landfill, and they have reduced carbon emissions by 6 million tonnes. Would he like to see that extended to all industries throughout the country?

[Mark Pawsey]

My hon. Friend makes a good point about the industry’s activity. None the less, I want to focus on the concerns that a cost input of the industry is significantly out of line with that of similar manufacturing companies based elsewhere. I shall add to the Civitas quote. The think-tank said:

“The response to the price hike”—

in energy costs—

“will be industrial emigration. Companies, especially multinationals, will leave the UK to settle in countries with lower energy prices and fewer punitive costs. Those who cannot afford to relocate will likely fold. In the long-term, foreign investment will also dry up, leaving the UK an industrial backwater.”

That is a real concern for companies involved in manufacturing, especially in this sector.