Energy-intensive Industries

Judith Cummins Excerpts

Wednesday 6th July 2022 Westminster Hall

[Judith Cummins (Bradford South) (Lab)]

I beg to move,

That this House has considered support for energy intensive industries.

It is a pleasure to serve under your chairmanship, Mr Stringer. I am grateful that we have the opportunity to address the mounting problems currently facing energy-intensive industries. Over the past few months there has been increasing concern—turning to panic—about the energy crisis and the huge rises in gas and electricity bills. Households and families are struggling, as are many of our businesses.

As we all do in this place, I spend a significant amount of time in conversation with businesses and workers in my constituency and across the country, hearing about their concerns, anxieties and plans for the next few months and years. Those industries are the lifeblood of our economy, and those workers are the beating heart of this country’s wealth, growth, production and potential. Energy-intensive industries, such as steel, food manufacturing, chemicals and building materials, are fundamental to our economy. Those industries tell me, time and again, about rising energy prices. I am aware of case after case of businesses, having survived a very difficult few years during the pandemic, being brought to their knees by eyewatering energy prices.

[Ms Marie Rimmer (St Helens South and Whiston) (Lab)]

I thank my hon. Friend for securing the debate. Once energy-intensive industries are gone, it is very hard to get them back. Does she agree that the Government need to support our energy-intensive businesses, as other countries are doing, before it is too late?

[Judith Cummins]

I absolutely agree; these industries are fundamental to the future of our economy. The Minister can imagine my dismay when I raised one of the cases from my constituency with the Minister for Energy, Clean Growth and Climate Change, the right hon. Member for Chelsea and Fulham (Greg Hands), at Business, Energy and Industrial Strategy questions on 7 June, and I was told that my example was just an “extreme” case. Therefore, presumably, it was not worth his time addressing. The case in question is an energy-intensive business in my constituency, whose energy bills have risen from £7 million to £35 million. However, that is not an extreme case. In fact, industry after industry have been warning for months about the impending problems, and raising the alarm on the dire situation they now find themselves in.

[Mike Amesbury (Weaver Vale) (Lab)]

One such industry is in my constituency, Tata Chemicals Europe. The managing director has fed back to me exactly your concerns; it is a real live issue across the country.

[Judith Cummins]

My hon. Friend is absolutely right that it is a national problem and needs a response from the UK Government. Almost all industries are feeling the effects of soaring energy prices. However, for some industries, such as chemicals, steel, ceramics, cement and shipping, it is their extreme energy intensity and the singularity of their outputs that make it nearly impossible for them to react to energy price fluctuations. Those energy-intensive industries face a unique set of challenges that need to be addressed directly by the Government or they will face significant job cuts, lost investment and, ultimately, factories closing. There are good jobs at risk here.

If that seems too extreme for the Minister, he should know that Make UK, which represents Britain’s manufacturing industry, has made it clear that more than two thirds of companies claim that rising energy costs are causing “catastrophic” or “major” disruption to their businesses. Make UK has said that eyewatering energy costs have become “a matter of survival” and has called on Ministers to do “whatever it takes” to support businesses and protect jobs. Without that, they face pushing these essential industries closer to breaking point.

The UK’s glass industry also faces an increasingly challenging position. With energy prices tripling and gas bills quadrupling, the glass industry has repeatedly asked the Government to recognise the unbearable pressure these prices have placed on an industry that is so vital to the UK. It needs support—any support—because price hikes are putting UK glass manufacturers at a competitive disadvantage, risking undoing the hard work on decarbonisation, quashing inward investment and, ultimately, passing on a rise in prices to consumers at a time when we all know that inflation is already ballooning out of control.

While the Government continue to bury their head in the sand, it is working people who will pay the price and suffer. British Glass states that

“without firm action to address the industrial energy crisis, we risk…loss of employment across the north of England.”

I say to the Minister, this is not levelling up; this is the Government playing fast and loose with other people’s jobs.

The Government’s own figures, laid out in the latest energy price comparisons, reveal that industrial electricity prices in the UK are significantly higher compared with the rest of Europe, and indeed the world, with extra-large consumers facing prices 40% above the median of the EU14. It is worth noting that under the coalition Government, BEIS used to publish annual energy prices and bill impact reports, but that has been stopped. Minister, will you outline when those reports will be reinstated?

The energy White Paper in 2020 called for

“a strategic dialogue between government, consumers and industry on affordability and fairness”,

but that has not happened yet. Will the Minister update me on any progress in those conversations?

The petrochemical group INEOS has also warned that British manufacturing is now under serious threat from competing regions, such as the US, because of high energy costs. It cites our producers facing gas prices seven times higher than the levels paid by US competitors. To put the size of the problem into perspective, INOVYN, a chlorine manufacturer operating in Runcorn, on the banks of the Mersey, uses as much electricity as the nearby city of Liverpool.

However, the problem is not new. Last year, UK Steel published its report into the huge structural barriers it faces because of out-of-control energy prices.

[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?

--- Later in debate ---

[Lee Rowley]

My hon. Friend is an absolute champion of the ceramics industry, and I know how important it is for his constituency. As he indicates, it has been a real success story for our country, and we want to ensure that it continues to be a success story. His advocacy in this place is absolutely the way to ensure that that happens. We accept that there is a challenge—there is no question of that. Over recent months, the Government have acknowledged that challenge in papers such as the British energy security strategy, which is important and has been welcomed by a number of industries as part of our ongoing dialogue, and have started doing things to address it.

I am glad the hon. Member for Bradford South has acknowledged and welcomed the compensation scheme. It is not something to quickly pass over; it is a substantial increase in money—if that is the yardstick we are using. It is substantial confirmation that we are serious about supporting our energy-intensive industries. From the extensive conversations I have had with colleagues in this place and with the industries themselves, the changes coming from that have been welcomed. When people say, “The Government need to do something”, the Government have done something.

The energy security strategy is clear that there will be a further consultation on a further element of what we are seeking to do, and I expect that to begin shortly. We are considering using that strategic dialogue, which the hon. Lady indicated is important, about what else is reasonable and proportionate to do over a longer period of time. None of these issues is straightforward or has a simple solution; otherwise, this Government or previous ones, including the Labour Government pre-2010, would have done it. It is a difficult and challenging problem and we need to do something about it, as the Government have done, and look at what can be done in the future.

I will address a few of the hon. Lady’s points. Unless we contextualise this conversation and conduct it in a reasonable manner, it will go off in all sorts of directions that are ultimately unhelpful. I understand that ultimately it is for other people to choose their words, focuses and emphases, but there has been progress on this agenda in recent months and that should be acknowledged. It is recognised that the Government are absolutely serious about supporting these industries.

[Judith Cummins]

I take that as some kind of criticism of my words, many of which were given to me to represent British industrial businesses. We have heard so much from the Minister about the difficulty, accepting that there is a challenge and listening, but he needs to act because British businesses and energy-intensive businesses are suffering and crying out for more help.

[Lee Rowley]

Those are exactly the kinds of statements that I think, with the greatest of respect, are not entirely helpful. The Government have acted, and it should be acknowledged that we have done so. Hundreds of millions of pounds have been brought forward in recent weeks, which should be acknowledged as a significant step forward. As I have already said during the past 10 minutes, we accept there is a challenge, and we are going to do more. We have already committed to bringing forward at least one additional consultation—

[Judith Cummins]

rose—

[Lee Rowley]

I am happy for the hon. Member for Bradford South to take some of my time. What exactly should we do?

[Judith Cummins]

I am happy to take up some of the Minister’s time. Shall I repeat the eight questions that I asked in my speech that he has not—[Interruption.]

[Graham Stringer (in the Chair)]

Order. Interventions should be brief and to the point. It is not a dialogue.

[Judith Cummins]

I am happy to send the Minister a copy of the eight questions I asked him in my speech. He is yet to address a single one of them.

[Lee Rowley]

The challenge with this debate is that we all accept there is a problem, and we all accept that there is a wider context of global issues—some of which are beyond our control—but ultimately, the hon. Lady needs to propose as well as oppose. If she has a proposition, I would be very happy to hear it, as would the Government, but I did not hear a proposition in the 20 minutes that she spoke for.

“Do more” needs to be followed by another sentence that says precisely what to do, because when you talk to energy-intensive industries—I am not suggesting that the hon. Lady does not—and have detailed dialogue with them, you realise that there is a significant amount of nuance underlying this discussion. As my hon. Friend the Member for Stoke-on-Trent South has outlined, you have some energy-intensive industries that are very heavily based on gas. You have other energy-intensive industries that are very heavily based on electricity, as my hon. Friend the Member for Central Suffolk and North Ipswich (Dr Poulter) has indicated. Other businesses that are not energy-intensive industries are also reliant on some unusual ways of procuring and using energy, and if we do not recognise that nuance in any solutions that we propose, ultimately—