North Staffordshire Ceramics Industry: Energy Costs

Gareth Snell Excerpts

Tuesday 4th March 2025 Westminster Hall

[David Williams]

I thank the right hon. Member for those comments. I know that she has spoken passionately about this matter in the past, and I will come on to the point about the need to support companies with their energy bills.

I was talking about how ceramics have an impact on our everyday life. Without refractories, we would not have the ability to make steel, glass and other high-temperature products. Without ceramics, we would have no cars, no buses and no mobile phones—what a scary idea. Without advanced ceramics, we would have no aircraft, defence or medical equipment.

[Gareth Snell (Stoke-on-Trent Central) (Lab/Co-op)]

I thank my hon. Friend and constituency neighbour for giving way. Like me, he will have heard that advanced ceramics carbon filters are going into submarines being built not just for the UK, but for the Australian navy. With the commitment that this Government have rightly made to huge increases in defence spending, perhaps he will allow me to join him in suggesting to the Minister that one way we could help the entire ceramics sector is by redirecting some of that commitment to defence spending to ensure that those ceramic component producers get the help and support they need right now.

[David Williams]

I thank my hon. Friend and constituency neighbour for that intervention. I could not agree more; I am certain that the Minister will have heard those comments and I wholeheartedly support them.

Of course, we would be eating and drinking from wooden bowls and cups without the beautiful tableware that we enjoy—including, as I have said, many of the plates, cups and saucers we see here across the Westminster estate. The world as we know it simply would not exist without ceramics. I urge the Government to recognise that the UK ceramics industry is a critical enabler of the UK economy—used, as we have said, from building homes to high technology to steel making.

However, I repeatedly hear concerns from companies regarding their sustainability following dramatic increases in their energy bills. For energy-intensive industries such as ceramics, energy cost pressures are significant. In fact, I have heard from companies in my Stoke-on-Trent North constituency that their energy bills have trebled. One company told me that it has seen energy bills increase by 300% in 10 years. The sector was hit hard by the energy crisis, and inaction left us too dependent on tyrants such as Vladimir Putin. That has had a huge impact on both production and raw material costs, and support is urgently needed to protect these businesses. Sadly, some employers across our city are already making redundancies due to escalating costs, and that disturbing trend will only be exacerbated by inaction.

It takes a vast amount of heat to produce the kind of ceramics products we make. According to Ceramics UK, the UK ceramics industry uses about 650,000 MWh of electricity and about 4.5 million MWh of gas every single year. With gas currently costing about £47 per megawatt-hour and electricity in the region of £297 per megawatt-hour, the costs quickly add up. When we consider that gas used to cost about £11 per megawatt-hour, the impact on those businesses is clear to see.

Of course, a significant portion of those costs comes from non-commodity taxes and levies. Many ceramics companies pay high carbon taxes under the UK emissions trading scheme and ever-tighter restrictions on free allowances are pushing up costs even more. Because the industry is gas intensive, while still using a lot of electricity, very few manufacturers receive the energy-intensive industries exemption.

I am really proud that this Government take the climate crisis so seriously. A move towards green energy is desirable; if we can get to that point, wonderful. However, the reality at the moment is that companies face significant bills. That is a fixed cost that the companies cannot do anything about, and moving towards low carbon is not always straightforward. It is absolutely right, as I said, to push towards a clean energy transition, but energy-intensive industries need a higher level of support in switching to low-carbon methods. The technology to switch from gas to electricity firing is not readily available for many ceramics manufacturers, and connections to the grid are poor.

Some European countries are already taking action and have been for some years to support their ceramics sector. The European Commission recently unveiled its affordable energy action plan, which includes investing in liquefied natural gas projects to help companies to lower their costs. A number of other countries are also helping their energy-intensive industries. It is vital that the UK follows suit.

The history of our city is one of hard-working people. The ceramics industry is in our DNA. If we fail to act now, we risk losing not only the unique skills that, as we talked about before, have been honed in the Potteries for hundreds of years, but the communities formed around them. I have questions for the Minister, but I start by thanking her for agreeing to meet me, my parliamentary colleagues, Ceramics UK and the GMB union to discuss the technical details around the support the sector needs.

As a starter, however, following my discussions with Ceramics UK, the sector would like the Minister to consider the merits of offering subsidies for smaller manufacturers’ energy costs. Indeed, Ceramics UK has told me that the cost pressures can be up to six times greater than they were in 2021. For the manufacturers that can use electricity, eligibility for the Government’s energy-intensive industries exemption scheme could be opened up for all UK ceramics manufacturers, including by removing the UK business level test. The Government could also mandate priority grid connections.

For ceramics manufacturers unable to switch from gas, could the Minister consider exempting the sector from new taxes and levies on gas, in recognition of the limited alternatives currently available? Ceramics really is the hardest of all energy-intensive industries to decarbonise. Although Great British Energy will reduce energy bills in the long term, failing to reduce energy costs for the sector now could put our ceramics industry at further risk, and that is simply not acceptable.

With carbon taxes hammering the sector, I also ask the Minister to consider the merits of introducing a temporary exemption from the UK emissions trading scheme for UK ceramic manufacturers until an effective carbon border adjustment mechanism is up and running and ceramics manufacturers can apply for CBAM phase 2.

Something that might also be of great help to our wonderful small and medium-sized enterprises in the sector would be the provision of ultra-low interest loans to help to finance more energy-efficient kilns, dryers and related equipment. Hydrogen presents an opportunity for the sector to decarbonise: Ceramics UK recently unveiled a custom-built pilot kiln that runs on hydrogen. Will the Minister evaluate the hydrogen supply chain and market currently available to the ceramics industry, and how that can be better distributed? I also ask the Minister that, as we discuss the support the sector needs, the Department for Business and Trade work collaboratively with colleagues in the Department for Energy Security and Net Zero, among others, to find a solution on a cross-departmental footing.

Without a desire to move away from the topic of energy costs, it would be remiss of me not to point out one further concern that the sector often raises with me and my colleagues. Counterfeit back-stamping of tableware products from the likes of China is affecting our UK businesses. Although I appreciate the Government’s efforts to regulate against those products through anti-dumping regulations and anti-dumping duty, I am concerned that many of those products slip through the net. The fake products get listed on internet sites, so I ask for a cross-departmental approach to review tabling offences and the classifications for importing counterfeit tableware products.

I thank the Minister for coming to answer my questions, and I invite her to visit my constituency of Stoke-on-Trent North so that she can see just how brilliant our potbanks are and how important they are to our local economy and people. We must keep those pots open and those kilns fired. The time to act is now.

[The Minister for Industry (Sarah Jones)]

It is a pleasure to serve under your chairmanship, Sir John. I am grateful to my hon. Friend the Member for Stoke-on-Trent North (David Williams) for securing this important debate. I begin by echoing his thanks to the trade unions, the industry and Ceramics UK for all they do. I have engaged with Ceramics UK quite a bit since taking up this role, and previously in opposition, and I work closely with the unions and the industry.

My hon. Friend clearly laid out the challenges we face, as well as the challenges facing his community’s disposable household incomes, and the importance of getting this right. He is right to look to the future of ceramics, not to the past. There are several industries that we want to grow in the UK, but we have historically focused on the past—steel is a case in point—not the future.

My hon. Friend talks about new advanced technologies, and the important uses of ceramics in our mobile phones, our aircraft, our defence and our medical equipment are clear to see, though little understood by those outside this sector. We can all do more to make sure people understand the ceramics industry and what it is for. The industrial strategy is one way to do that.

As my hon. Friend knows, the industrial strategy is coming out in the spring. We promised it for years in opposition, and the previous Government but one tried, but they did not persevere. We have identified eight growth sectors within the strategy—advanced manufacturing is one of them—but foundational industries have to power those growth sectors, which is where ceramics is important.

I nod to my hon. Friend’s well-made point about defence, which is one of the growth sectors in the industrial strategy. Over the last few days, we have seen this Government’s commitment to increasing our defence spending. The Chancellor spoke at the Make UK conference today about how we can change defence procurement to include more of this country’s SMEs. We have also been creative in using UK Export Finance to create jobs with Thales in Belfast. There is more we can do, and I will take away my hon. Friend’s point about advanced ceramic carbon filters. I suspect there are other potential applications in this space.

I acknowledge and appreciate the very real challenges that my hon. Friend raises. The cost of energy bills is very difficult for the ceramics industry and other energy-intensive industries. Every one of us has suffered from the huge price hike after Russia invaded Ukraine, although our energy costs are not comparable with those of our neighbours.

My hon. Friend also highlighted how electricity costs so much more than gas and the challenges that will bring as we decarbonise. He mentioned the emissions trading scheme and the ongoing consultation on free allowances. I also heard his well-made points about the low carbon transition and the challenges for sectors such as ceramics, where its up-front cost is potentially prohibitive.

[Gareth Snell]

The Minister probably knows as much about ceramics as those of us from Stoke-on-Trent, as she is constantly on her brief.

On the transition, one of the challenges facing ceramics companies in Stoke-on-Trent and around the country is that the margins on their products are not sufficient to allow big up-front capital investments, which means that going from a gas kiln to an electric kiln is often beyond their reach as they simply do not have the cash flow.

One solution that the Minister could potentially take back to the Department is some sort of VAT exemption for energy-intensive industries and companies that are looking to move towards more low-energy, low-carbon equipment. Perhaps the public sector decarbonisation scheme, which is currently undersubscribed, could be used in some way to help energy-intensive private companies to access new technology that would reduce not only their carbon output but their long-term energy costs through efficiencies.

[Sarah Jones]

I thank my hon. Friend for those points, which he has previously raised with me. I can certainly take away the point about the public sector decarbonisation scheme. Bizarrely, as he knows, it is not part of my brief, but that does not matter. This Government work across Departments and across barriers, and I will endeavour to look into it. The point is well made that it can be challenging when a company has small margins and big up-front costs, especially in these industries where there has not been infrastructure investment for a long time. A lot of places need general infrastructure investment, and we are looking actively at this issue through the spending review process.

Happily, I can say that we are looking to answer all the questions asked by my hon. Friend the Member for Stoke-on-Trent North. I cannot promise what the answers will be at this point, and I cannot promise that we will do everything we seek to do, but we are well aware of all his points and are looking at them in depth.

We are looking at subsidies on energy costs. My hon. Friend said that the Department for Business and Trade and the Department for Energy Security and Net Zero should work together. I sit in both Departments, so I have conversations with myself about these issues. There are competing vantage points that we need to grapple with, but the advantage of my sitting in both Departments is that officials from the two Departments meet to find solutions before speaking to me, which is helpful. They are working well together.

We are also looking at the energy-intensive industries exemption scheme. As my hon. Friend knows, grid connections are an issue across the board. We are working on how to remove undeveloped, speculative programmes from the grid connection queue and prioritise others. One of my roles as the Minister for Industry is to point to the need not to forget our existing industrial base and the need for it to connect to the grid, as well as the need for the important data centres, artificial intelligence and new technologies and new investment that we want to come to the UK. If we cannot get our own industry connected in the way we want, we are getting something wrong, so my hon. Friend is right to make that point.

I met representatives of the energy-intensive industries last week, including Rob from Ceramics UK, and I am following up on all these things with the Treasury and with officials. We agreed on a couple of things at that meeting, and one is to have a session with the industrial strategy team and the energy-intensive industries to make sure we are all working towards the same outcome. Another is to talk to the Treasury about the challenge we face in how the ETS and the CBAM align and fit together, or not, depending on policy. These things are enormously complicated, as my hon. Friend knows, and CBAM is a Treasury lead. However, I am very aware of the need to get that relationship right; otherwise, the system does not work at all.

My hon. Friend talked about hydrogen, which is very important and is part of my brief in the Department for Energy Security and Net Zero. We are developing a kind of hydrogen network. We have had what we call HAR1, or hydrogen allocation round 1, which was the initial agreement to fund 11 hydrogen projects—electrolyser projects—around the country. There is hydrogen in the carbon capture and storage clusters that we are developing, and we are currently looking at what the next phase of the hydrogen roll-out will be.

My hon. Friend knows that hydrogen is currently very expensive. We need to work out a path to reduce costs, which is what we are grappling with at the moment, in a climate where it is difficult to bid for money in the spending review. How can we unleash the hydrogen industry and give certainty to businesses that want to invest but need the right signals? How can we do that and use money wisely? And who pays for it? People are very interested in hydrogen, whether in steel, in transport or in the green energy space—it has a lot of uses. We need to make sure we are making the right decisions. I will speak to the hydrogen team about ceramics, and I will ask what we are looking at in that space.

[Gareth Snell]

Again, I am grateful to the Minister for her generosity in giving way. My hon. Friend the Member for Stoke-on-Trent North (David Williams) is right that hydrogen could be the thing that helps our industry, but electrolysis requires electricity. Electricity generation is capped to the gas price, and therefore the gas price drives the hydrogen price. Unless there is a way of decoupling that rather difficult circuit, we will find ourselves replenishing fuel without a particular discount.

Our other unique challenge, as my hon. Friend expertly laid out, is that these factories are in communities, because that is how ceramics worked—a potbank was built and then houses were built around it. Connecting to hydrogen would not be suitable if the hydrogen has to be contained in large towers, which are better suited to large out-of- town factories.

Although I welcome the Minister’s commitment to hydrogen, I hope she can bear those two points in mind, because ceramics are a unique challenge. However, we are willing to work with her to find a solution.

[Sarah Jones]

My hon. Friend articulates his concerns very well. Connecting the gas sounds like a song: “The hip bone’s connected to the thigh bone.” It is very challenging, and he is right to say so. The challenge with hydrogen is getting it to a point where we can deliver it at the scale we want. Or will it always be used in certain areas for certain things, as we will never get the cost down? That is what we are grappling with. On the potential jobs, potential growth and potential exports, these are huge opportunities for the UK, but we need to work out how we take it forward.

Finally, my hon. Friend the Member for Stoke-on-Trent North mentioned the huge challenge of counterfeiting. He nodded to the actions taken by the Trade Remedies Authority. I know that Ceramics UK and ceramics manufacturers have responded to that review and a final recommendation is due in July. Of course, I will make representations where needed. I recognise the challenge that my hon. Friend highlights.

Trade officials regularly meet representatives of Ceramics UK. I do not wish to add to the burden of my colleagues, but it might also be good for my hon. Friend to speak to the Minister for Trade Policy and Economic Security, my right hon. Friend the Member for Lothian East (Mr Alexander), if he has not already done so, about some of the challenges we face.

Hopefully, I have answered my hon. Friend’s questions. I congratulate him again on securing a debate on such an important issue, on behalf of his constituents who work in such a fantastic industry for our country, and hopefully we can work together to fix some of these challenges.

Question put and agreed to.