China Clay Industry (Job Losses)

Michael Fallon Excerpts

Wednesday 5th February 2014 Commons Chamber

[The Minister of State, Department for Business, Innovation and Skills (Michael Fallon)]

I congratulate my hon. Friend the Member for St Austell and Newquay (Stephen Gilbert) on securing a debate on this important issue. We recognise the importance of the china clay industry to his constituency and to the region as a whole. It is inextricably woven into the industrial fabric of the west country. Any visitor to St Austell is, as he said, likely to be struck by the impressive sharp peaks known as the “Cornish Alps”, which dominate the surrounding landscape and represent the most visible part of a story that, as he told us, goes back some 250 years.

Imerys is a major employer in the south-west, and its plans to make redundancies as part of a restructuring exercise following the recent merger will clearly have come as a major blow to the employees concerned, to their families, and to the communities in which they live. I fully appreciate the potential implications of this for St Austell and the surrounding area. This was of course a commercial decision for the company. I understand that it has been forced to make some difficult decisions in order to remain competitive and to safeguard the future of its operations in the United Kingdom.

Naturally, we want to keep as many jobs as possible here in the United Kingdom, but it is not for the Government to tell companies how to run their businesses. We certainly recognise that they face fierce competition from low-cost economies, particularly in basic raw materials such as china clay. We operate in an increasingly globalised, competitive environment and, as I am sure my hon. Friend would agree, the Government have to be careful not to respond with protectionist measures.

I believe that the redundancies to which my hon. Friend has drawn the House’s attention will take place towards the end of February and will be voluntary. As recently as 22 January, Jobcentre Plus approached the company to offer support through its rapid response service. Imerys has engaged Penna, a third-party provider of support, to advise the people affected. I want to tell my hon. Friend that Jobcentre Plus stands ready to work alongside Penna and Imerys should it be asked. Although these redundancies are a commercial matter for Imerys, we are working with the company on the important issue of energy costs, and UK Trade & Investment is actively engaged with the company as regards assistance with exports. More widely, other Government measures are in place to promote growth and job creation in the Cornwall region.

Britain is one of the world’s largest producers of china clay after Brazil, the United States and China. China clay is our second most valuable minerals export after hydrocarbons. However, china clay sales have been on a declining trend since 1988. Increased competition in the global markets for paper clays has reduced profitability for many producers. Brazil has enormous deposits of high-quality clay in the Amazon basin and low production costs, making it highly competitive globally, despite the additional shipping costs. The industry, including Imerys, has responded by effecting structural change and investing in more efficient production methods. It has restructured its production in Cornwall significantly since 2006, and that has sadly resulted in the loss of over 800 jobs over this period. However, as my hon. Friend will know, there have also been closures in this industry in other parts of the world, including the United States.

I understand the pressures being faced by the energy intensive industries, such as the china clay sector, in terms of their international competitiveness, and I am extremely concerned about the impact of relatively high energy prices. The Government are very clear that decarbonisation does not and should not mean deindustrialisation. There would be no advantage—for our economy or in terms of global emissions reductions—in simply forcing UK businesses to relocate abroad.

On electricity prices, we have implemented measures to reduce the impact of policy on the costs of electricity for the most electricity-intensive industries. We are arguing in Europe to avoid another renewables target, which would simply serve to increase European electricity prices further.

We have already begun to implement the £380 million compensation scheme, which runs until March 2016, for electricity-intensive businesses, to help offset the indirect costs of the carbon price floor and the European Union emissions trading system, subject to state aid guidelines.

Imerys responded to our consultation on the compensation scheme and made a case that the mining of clays and kaolin are electricity intensive and, as such, should be included in the compensation scheme for the indirect costs of the carbon price floor. Based on the information Imerys provided, the Department for Business, Innovation and Skills will seek to compensate the mining of kaolin and clays, along with a range of other electricity-intensive sectors, as part of our state aid case to the European Commission.

I recognise that the job losses have been announced against a difficult economic backdrop for the region. The Cornwall economy faces a number of challenges, which are reflected in low wages, low productivity and relatively low skills attainment. The Cornwall and Isles of Scilly local enterprise partnership now leads local partners in analysing the local economy, building partnerships across key delivery agencies and prioritising investment in growth. The partnership is in the process of developing its strategic economic plan and investment framework, which will deliver sustainable growth through innovation, increasing competitiveness, consolidating existing assets and capitalising on opportunities presented by the region’s distinctive natural resources. The plans balance support for bedrock industries, such as food, farming and marine, with support for new industries, such as wave energy, geothermal and digital media.

The partnership will have the opportunity to negotiate a growth deal with Government during the period from April to June and to secure its share of the £2 billion local growth fund, which will come into operation from April 2015. In addition, the regional growth fund is providing grants to small and medium-sized enterprises and enabling infrastructure in the region, and just over £6 million has been made available through the Growing Places fund. As a category A assisted area, Cornwall and Isles of Scilly is also eligible for convergence funding from the EU, with some £520 million allocated for the seven-year period beginning this July.

The Newquay Aerohub enterprise zone, centred on Newquay airport on the north coast of Cornwall, will include areas with airside access. The provision of substantial hangar, manufacturing and office space is expected to deliver more than 5,000 jobs. The focus will be on aviation and aerospace activity, including aircraft maintenance, aerospace manufacturing, flight testing and trials of unmanned air vehicles and related training activity.

Plymouth was one of the 20 locations announced in wave 2 as being able to bid to central Government for a city deal. It will be a twin-LEP city deal with Cornwall and Isles of Scilly, and we hope that that will contribute to a deal based on strengths in advanced engineering and design, marine renewable energy, maritime and sub-sea operations and supporting technologies. The deal seeks to do that by increasing the commercialisation of research in these areas and increasing exports from its high growth.

On the specific issue quite rightly raised by my hon. Friend, he will understand that the aggregates levy is a matter for Her Majesty’s Treasury. He has already informed the House about our vigorous response to the state aid investigation. The European Commission is of course perfectly entitled to ask questions about any of these levies and schemes, and we have a number of cases before it at the moment, but as a member state, we are equally entitled to respond robustly and to defend the various arrangements we have put in place. I am not at the moment able to give him any more information about the exact state of the investigation or the timetable involved, but I am happy to write to him as soon as I get more information.

My hon. Friend made a powerful case about the uses of secondary aggregates both in construction and as one of the greener sources of material, and I do not see any need to add to what he has said.

Finally, let me accept my hon. Friend’s invitation to meet him and the industry. As the Commission investigation draws to a close, I would be happy to see him and the industry to discuss all the issues in more detail. I again thank him for drawing the attention of the House to this important industry and the future that I believe it still has.

Question put and agreed to.