Energy Intensive Industries

Mark Pawsey Excerpts

Wednesday 4th December 2013 Westminster Hall

[Mark Pawsey (Rugby) (Con)]

I congratulate my hon. Friend on his quick-witted response to your invitation to speak, Mr Robertson. May I add my congratulations to the hon. Member for Newcastle-under-Lyme (Paul Farrelly) on securing this important debate? He made a strong case in support of energy intensive ceramic industries in his constituency. I want to speak about an energy intensive industry in my constituency and to refer to the packaging industry.

My constituency has a company that has manufactured cement for more than 150 years. It was originally called Rugby Cement, but is now operated by CEMEX. It is one of the largest plants of its kind and the most recently erected in the UK, involving total investment of around £200 million. It is operated by one the world’s largest producers of cement.

Energy costs for cement manufacturers takes up to 40% of gross value added, of which electricity is a significant part, but not in this instance the primary source of heat. In contrast with steel, aluminium and ceramics, the primary heat source in cement manufacture has traditionally been coal, but it is now increasingly alternative fuel, often derived from waste, ensuring that waste is put to good use instead of going to landfill. In that way, it contributes a significant environmental benefit.

The electricity is used in the process of grinding the clinker to create cement powder, in the movement of various materials in the plant and the blending process to create different varieties of cement products, and finally in the bagging of the finished product for transportation and sale. Therefore, significant amounts of electricity are used.

Before coming to this place, I spent 30 years in the packaging industry and I find myself chair of the all-party group on the packaging and manufacturing industry. It represents companies involved in the manufacture of paper, board, aluminium, plastics and particularly glass packaging. We have heard from hon. Members about the impact of electricity prices on the manufacture of glass and I will refer particularly to that used for bottles and jars. Manufacturers of cement and packaging have seen significant increases in the cost of energy. The British Glass Manufacturing Confederation has referred to a 14% increase in the past 12 months.

That increase has arisen partly as a consequence of the Government’s objectives on climate change and carbon dioxide emissions. Hon. Members on both sides of the Chamber today have recognised that the present and previous Administrations have gone too far and imposed an excessive burden on those manufacturers. The present Government have recognised that in their action to exempt the most energy intensive industries from that burden. The announcement by the Energy Minister in July this year was welcomed by many energy intensive industries as a start and a move in the right direction. I am sure, across the Chamber, that we hope the Minister will tell us that the Government will be able to go further. However, there are significant concerns that some industries have not benefited—cement and packaging fall into this category—because they are not eligible for the compensation that has been announced.

Both sectors have made representations that electricity costs in the UK are significantly higher than in other countries, and increasingly, manufacturers are multinational, with plant across the world. CEMEX, for instance, is a multinational producer, and it knows exactly what it costs to produce a kilo of cement at any location in the world. It is able to calculate where the most cost-efficient location is and a concern, which has again been expressed across the Chamber, is that if we are not able to provide additional forms of support in terms of energy costs, manufacturing will migrate to overseas plants rather than taking place in the UK. It will be an absolute tragedy if, as our economy recovers and turns the corner, our manufacturers are not able to take advantage of the growth in the economy and of the additional effect that that will have on UK employment.

That is particularly important in respect of the cement industry, because construction has been in a difficult place over the past five years. I am told that the supply chain is starting to see a renaissance and increased activity, and I very much hope that our UK-based manufacturers will benefit from that resurgence. I hope that the Minister will be able to provide reassurance today to Members across the Chamber about the work that the Government will do to support our energy intensive industries.