Energy-intensive Industries

Dan Poulter Excerpts

Wednesday 6th July 2022 Westminster Hall

[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?