Cost of Energy: Ceramics Sector

Jonathan Gullis Excerpts

Tuesday 17th January 2023 Commons Chamber

[Jonathan Gullis (Stoke-on-Trent North) (Con)]

The small but mighty city of Stoke-on-Trent is the home of our country’s outstanding ceramics manufacturing industry. Its rich history and heritage in ceramics played a leading role in the United Kingdom’s industrial revolution, putting our great city on the map around the world. It is important to point out that the term “ceramics” covers not just the important tableware and giftware sector but bricks, clay roof tiles and pipes, wall and floor tiles, sanitary ware, refractories—critical to manufacturing steel and glass among other items—and advanced technical ceramics used in everything from aerospace to medicine.

In Stoke-on-Trent North, Kidsgrove and Talke, we have world-class ceramics businesses such as Churchill China, Steelite, Burleigh, Moorcroft and Johnson Tiles, to name a few. They all welcome the energy bill relief scheme, but I worry that energy-intensive ceramics businesses will still face crippling energy bills if prices spike next winter or sooner.

[Aaron Bell (Newcastle-under-Lyme) (Con)]

I am grateful to my hon. Friend and neighbour for giving way. Next door, in Newcastle-under-Lyme, we do not have quite as many firms as in Stoke-on-Trent, but we do have Silverdale Bathrooms and Ibstock Brick, which makes bricks in Chesterton. They have both come to me because they are also worried about the potential for energy prices to go back up if support is not there in the future. We all hope that the increase in energy prices is temporary. Does it not make sense—I am sure that he will come to this—for the Government to shepherd our companies through the war in Ukraine and this period of difficult energy times so that they can continue to provide jobs for our constituents for many years to come?

[Jonathan Gullis]

I am grateful to my hon. Friend, who is an incredible champion for the people of Newcastle-under-Lyme and the ceramics sector, as well as my hon. Friend the Member for Stoke-on-Trent South (Jack Brereton), who is sat behind me—he was made in Stoke-on-Trent, born and bred, and is the heartbeat of our city. It is great to be surrounded by such supportive colleagues. My hon. Friend the Member for Newcastle-under-Lyme (Aaron Bell) is correct to say that as support will decrease from April onwards, there is a fear that, if prices were to go back up, while companies may be receiving good orders, they would be left with unaffordable bills. Wages are also having to be increased massively just to retain staff, let alone manage the recruitment crisis that the sector presently faces.

[Jim Shannon (Strangford) (DUP)]

I commend the hon. Gentleman on bringing forward the debate. I always like to come and support him, as he does me.

There is a local, independently owned ceramics businesses named Eden Pottery in my constituency. Some of its ceramics and pottery were used during the October season of “The Great British Bake Off”, so it has a bit of prominence. There has been recent news that the £150 payment will be distributed to small and medium-sized businesses at the end of February, but in some cases energy prices are trebling, so that will not really make a dent—I guess that that is what the hon. Gentleman is referring to. Does he agree that a greater assessment must be undertaken on the impact of that payment, and that additional funding really needs to be found as soon as possible?

[Jonathan Gullis]

I am grateful to the hon. Member, who is a really good friend. It is incredible that Strangford finds a way of linking itself to every single one of our constituencies across the House, and it could not be better served than by him; he is a doughty champion. I look forward to exchanging some pottery with him in the near future so that we can share in our fine ceramics. He is indeed correct to make the point about the cost implications of rising gas prices and the danger to small, medium and large firms, which could see lots of jobs lost if support goes earlier than it should do.

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

I congratulate my hon. Friend on securing this important debate. The ceramics sector has not received the level of support that many other energy-intensive sectors have to help with the transition and decarbonisation. Does he agree that, given that 97% of businesses in the ceramics industry are SMEs, the ceramics sector really needs a dedicated pot of funding from the Government to invest in the transition and in improving energy efficiency measures?

[Jonathan Gullis]

I am extremely grateful to my hon. Friend for his fantastic words. He is indeed correct to say that the ceramics industry has already put about half a billion pounds of its own money into decarbonisation and energy efficiency. I totally agree and understand that steel is important to this nation’s history as well as its future, but ceramics are just as important. Ceramics are in our mobile phones, and our kneecaps in some cases, as well as in the aerospace adventures we want to see—aeroplane engines literally would not fly without the ceramic film that goes around them. Ceramics are so important, with about 20,000 jobs across our United Kingdom dependent on them, so I hope we will see some support for them. The chase to net zero is fine, but we cannot do it by damaging the ceramics sector. We want to remain competitive with the world while China continues to dump its cheap, unruly products on our country unfairly. Thankfully, we are protected by tariffs for now—we need a longer-term commitment to them—but we also need the carbon border scheme and adjustments to ensure that we are competitive with mainland Europe. I totally concur with my hon. Friend.

On average, gas is roughly 10% of the cost of manufacturing a plate. However, companies are currently exposed to gas costs five times what they were for many years and have seen gas prices hit 20 times the previous normal cost. Companies should, of course, aim to build some resilience into their processes, but that kind of market fluctuation is beyond anything they could reasonably have planned for. Regrettably, businesses will certainly be put at a disadvantage because of the rapid and staggering rise in energy prices. Increased energy costs could have a significant impact on local businesses that do so much for the community. I want to ensure that the UK Government are acutely aware of the impact the cost of energy is having on UK ceramics and get a commitment from them that they will do all they can to protect it.

First, it is vital to point out the significance of the ceramics industry. As a proud Member of Parliament for Stoke-on-Trent North, Kidsgrove and Talke, an area that is hugely proud of the ceramics industry, I want to point out the ceramics industry’s centrality to both the national and local economies. The UK ceramics industry employs around 20,000 people. It is a crucial part of Stoke-on-Trent. Johnson Tiles, established in 1901, made over half of the 888,246 ceramic poppies for the Tower of London, commemorating all British and colonial servicemen who died in the first world war, and employs over 200 people in Stoke-on-Trent.

The UK ceramics industry contributes around £2 billion to the UK economy, which really does mean that ceramics are one of our country’s last great exports. The British Ceramic Confederation, which represents over 90% of UK ceramic manufacturers and whose chief executive is Rob Flello, estimates that the ceramic industry exports around £600 million a year. We use the world-leading products designed by companies such as Steelite, Churchill China and Burleigh in this place, in the Members’ Dining Room and Portcullis House, to name just a few. The very tiles on the floor just down the corridor in Central Lobby, at the very centre of our great democracy, are from Stoke-on-Trent. Sadly, it is a constant source of irritation and frustration to me that there are not anywhere near enough Stoke-on-Trent-made ceramics in Government Departments. Therefore, one of my first initiatives in my brief stint at the Department for Education was to ensure all tableware in my ministerial office was made in Stoke-on-Trent. I am very proud that my former private office in the Department for Education now proudly boasts its cups and saucers.

Not only does the UK ceramics industry clearly play a crucial role in both the national and local economies, but it is impossible to understand enough the emotional significance of this historic industry. For the people of Stoke-on-Trent and wider north Staffordshire, the ceramics industry is a source of immense pride. Local manufacturers are being priced out of the market by companies overseas in places such as China. This is, of course, at huge expense of the end product’s quality, as we all know that “Made in Stoke-on-Trent” is a sign of excellence.

The ceramics industry is an immensely energy-intensive industry. As such, Putin’s abhorrent, illegal and immoral invasion of Ukraine in February of last year has had a demonstrable impact on the industry. Gas prices have caused considerable instability in the ceramics industry, which is traditionally used to very reasonable energy prices. The base rate for wholesale gas prices is now £1.62, which is four times its stable average before February 2022.

Research by UK ceramics manufacturers suggests that productivity costs are exponentially higher—the average is 47% higher—in addition to an enormous increase in the price of energy. Again, research points to a staggering increase in costs, this time of around 400%. The UK has been hit especially hard by the global energy crisis, and our ceramics manufacturers have significantly higher overheads. By contrast with the UK, average price increases for overseas factories are only 29%. All this means that the sales volumes of ceramics manufacturers in Stoke-on-Trent are impacted and they struggle to compete against imported competition from cheap-labour countries such as China and European countries with far more generous support packages.

The shocking increases in prices meant that the Government’s previous energy relief scheme was so important for the ceramic industry and Stoke-on-Trent’s leading ceramics businesses. One manufacturer told me that over the winter months the scheme saved them an estimated £4 million, giving them a huge boost in these turbulent times. In times of global instability, the scheme has allowed our first-class manufactures to remain competitive, keeping their high-quality products on the market and on our shelves.

I welcome that the new scheme from April seems to include UK ceramics manufacturing, but overall it is still going to have a significant impact on manufactures’ overheads and thus competitiveness. In places such as Spain and Italy, which is a major competitor country on ceramics, their major ceramics businesses are being underwritten and helped to cope with energy costs. UK ceramics also struggle to compete with German competitors, which have electricity rates that are 38% lower.

For UK ceramics manufacturers to be most competitive, we need a level of support similar to that for, or at parity with, European businesses. This will ensure that the ceramics industry, the jewel in the crown of our great country’s manufacturing, is able to prosper well into the future. One way we could do this is to consider getting rid of regulations in order to make it easier for UK ceramics manufacturing sites to be regenerated. We could thereby drastically improve the short and long-term prospects of UK ceramics. Furthermore, we can point to other manufacturing industries such as textiles and plastics that are also struggling. If we cannot and do not support these industries, the UK will be far less competitive and, crucially, it will deter foreign investment. This puts skilled jobs at risk, not just in Stoke-on-Trent but throughout the country.

I must put on the record the devious behaviour of some energy suppliers that have sought to use never-before-used small-print clauses to levy additional charges and fees as a way around the price cap. I am aware of a business that was hit out of the blue with a £3 million bill for gas that the supplier bought from the wholesale market but that was seemingly lost in transit to its customers. It is important to note that the gas was never used by the manufacturer but was nevertheless charged to that customer. There are other examples of poor business practice used to extract money from hard-pressed UK ceramics manufacturers.

The UK ceramics industry is working tirelessly to become carbon neutral, as my hon. Friend the Member for Stoke-on-Trent South pointed out. In an energy-intensive industry, in the current energy crisis, this is all the more commendable. With the publication of the Skidmore review on net zero, the House should note that China still builds most of the world’s coal-fired power stations. UK ceramics manufacturers have to compete against a country that is not tied down by net zero targets. Many UK ceramics businesses are working with the British Ceramic Confederation to research the production of various ceramic products using hydrogen-fired kilns, and many UK ceramics manufacturers have signed up to the confederation’s net zero commitment by 2050.

As I outlined earlier, Stoke-on-Trent was at the beating heart of Britain’s first industrial revolution, and I am adamant that it can also be the centre of the green revolution, too. The British Ceramic Confederation is looking into the development of hydrogen technology to power factories. This is an exciting opportunity for the Government to support a crucial industry while also making this country more self-sufficient. As we all know, the war in Ukraine has vividly illustrated the importance of not relying on other countries for our energy.

In May, the British Ceramic Confederation was delighted to announce that £300,000 of Government funding had been awarded for a project to study the feasibility of using hydrogen as a fuel for the UK ceramics sector as the industry pushes towards net zero targets. This was a fantastic and highly welcome first step in supporting the ceramic industry to achieve net zero. Today, I ask the Minister to clarify what next steps the Government will take to further advance our goal of achieving net zero by 2050 by providing direct support on innovation to the UK ceramics industry? Will the Minister meet me and colleagues from the ceramics sector to explore direct research funding?

The purpose of this debate was to highlight, on the Floor of the House, the impact of the cost of energy on our great ceramics sector. It is impossible to overstate its centrality, at both local and national level, to communities such as Stoke-on-Trent North, Kidsgrove and Talke. I therefore implore the Minister to demonstrate that the Government remain steadfast in their support for the sector and those who work in it. As I have said, they are a fundamental element of Stoke-on-Trent’s economy, its jobs and its heritage.

This is one of our great country’s last great assets, and it is of paramount importance that we support it.