Ceramic and Brick Industries

Craig Tracey Excerpts

Wednesday 15th June 2016 Westminster Hall

[Craig Tracey (North Warwickshire) (Con)]

It is a pleasure to serve under your chairmanship, Mr Chope. I congratulate my hon. Friend the Member for Aldridge-Brownhills (Wendy Morton) on securing this debate.

I shall focus on the EU emissions trading system policy, which has already been highlighted but is of particular concern to Wienerberger, a brick manufacturer based in Kingsbury in my constituency. Like my hon. Friend the Member for Aldridge-Brownhills, I had the chance to stand on top of the kiln when I visited the company recently, which was quite exciting. Wienerberger has 13 factories throughout the country that produce bricks and roof tiles. It is employs 1,165 people in the UK. Its Kingsbury factory alone produces 40 million bricks per annum, which is enough to build 5,000 new homes.

Wienerberger’s specific problem is the proposal concerning the future carbon leakage policy. As has already been pointed out, and as I know the Minister is aware, carbon leakage in this sense refers to the relocation of UK production to locations where it is cheaper to manufacture because of environmental policies and/or lower energy costs. The direct result is a loss of investment and jobs from the UK economy. In EU ETS phase 3, ceramic sector installations, which include brick and clay roof tile factories, are deemed to be at risk of carbon leakage. As a result, factories receive a proportion of allowances based on the average of the top 10 performers across the EU in that sector, free of charge. If, as has been proposed by the UK and France, a tiered approach to carbon leakage risk is adopted in phase 4, it is likely that the ceramic sector will be reclassified as no or low risk and will thus receive significantly less free allocation.

[Wendy Morton]

Does my hon. Friend agree that with the increased demand for housing, we should be looking at ways to support the brick manufacturing industry?

[Craig Tracey]

My hon. Friend pre-empted part of my speech. She is absolutely right that we need more houses, and that it makes absolute sense for the bricks for those houses to come from local businesses in the UK.

The loss of the free allocation I have described will, when combined with an escalating market price for carbon allowances, significantly increase the cost of production. Meanwhile, competing construction materials, such as cement, will retain free allocation, creating market distortion. The situation is particularly acute in the UK as the carbon price floor, a UK-only policy instrument, adds further costs to the EU ETS carbon price for power producers. That additional cost is being passed on to businesses via electricity prices, with manufacturers being unable to pass them on to customers. Countries such as Germany and Italy are compensating for renewable electricity charges, but the UK is not. That further reduces the competitiveness of the UK brick and clay roof tile industry.

Wienerberger has factories across Europe, including in countries with significantly lower electricity costs than the UK. Any increase in UK production costs makes future investment in its UK factories far less attractive than investment in other European countries.

[Mike Wood (Dudley South) (Con)]

On that very point, the family-owned Hinton Perry & Davenhill brickworks in my constituency has recently invested £5 million in new energy and production efficiency measures. Does my hon. Friend agree that undermining the business model on which such brickworks operate reduces investment in energy efficiency, thereby worsening the situation, rather than helping?

[Craig Tracey]

I cannot say much more than that my hon. Friend is absolutely right. That is the nub of the problem. It is about investment as much as anything else.

Given the Government’s commitment to delivering 400,000 affordable housing starts by 2021, and the Construction 2025 strategy, which seeks to achieve a 50% reduction in the trade gap between total exports and imports of construction products and materials, it is essential that we maintain a UK manufacturing base of bricks and clay roof tiles. In order to achieve that, we must support local manufacturers in the UK, which will ultimately reduce the need for imported materials.

Competing construction materials such as cement and steel are set to retain carbon leakage status, creating distortions in the UK market. Importing construction products will have a negative effect on the UK trade balance and increase the UK’s consumption-based emissions. I should add that it is not only the brick and ceramics industries that raise these concerns; there is also support from other energy-intensive sectors, such as paper and glass industries.

In summary, my asks of the Minister are that the Government support these very important industries by ensuring that no tiered approach is applied, and that ceramic installations retain full carbon leakage mitigation; by maximising the provision of free allowances to preserve the UK’s competitiveness; and, finally, by allowing the current qualitative assessment process to continue. I look forward to hearing my right hon. Friend the Minister’s response.