Ceramic and Brick Industries

Wendy Morton Excerpts

Wednesday 15th June 2016 Westminster Hall

[Wendy Morton (Aldridge-Brownhills) (Con)]

I beg to move,

That this House has considered the ceramic and brick industries.

It is a great pleasure to serve under your chairmanship today, Mr Chope, and to see Members from both sides of the Chamber here in Westminster Hall. As vice-chairman of the all-party group on ceramics, and because the brick industry is in my constituency, I felt that it was important to raise this issue with the Minister.

The ceramics industry employs around 20,000 people in the UK, generating £2 billion in sales and exporting products all over the world. It is undoubtedly an industry of huge importance to our country.

In my constituency of Aldridge-Brownhills, there has been a large ceramics presence in the area since the early 19th century, when clay and coal mining boomed in the district. The availability of jobs in mining resulted in a population surge in Aldridge, to 2,478 by 1901, and by 1906 two of the mines—known locally as Drybread, which is near Coppice Road, and Bare Bones, at Leighswood—employed nearly 1,500 people between them. There is also the Brownhills Miner. If anyone is travelling through Brownhills or is on the A5, please make a detour to see Jigger, a 40-foot statue standing at the end of Brownhills High Street. It is a wonderful reflection of a proud industrial heritage.

Aldridge-Brownhills is now home to four companies working in the ceramics industry, which directly employ around 300 people across five sites. Some of the most famous clay products in the world originate in Aldridge, from the beautifully hand-crafted Imperial Bathrooms products, which are exported all over the world, to the bricks made at the Ibstock and Wienerberger sites, which are used to build new housing stock in the UK. Recently, some of the clay for the stunning art installation by Paul Cummins called “Blood Swept Lands and Seas of Red”—the poppies, as many will know, that were installed at the Tower of London—came from the Potclays quarry in Brownhills.

[Robert Flello (Stoke-on-Trent South) (Lab)]

I congratulate the hon. Lady on securing this debate. May I ask her to say a word not only for the fantastic ceramics industry itself—I am truly blessed in Stoke-on-Trent South with some wonderful businesses that are directly involved in ceramics—but all the ancillary businesses, which do related work such as designing or maintaining kilns?

[Wendy Morton]

Absolutely. The hon. Gentleman makes a very valuable point. In any discussion about business, it is always worth reminding ourselves that it is not only the one business that matters but all the other businesses that feed into it, be it businesses that work with kilns, businesses that provide paint brushes or businesses that do a whole host of other things. Also, there are all the other businesses, which are often family businesses, around the area, which perhaps provide sandwiches or other things for the people working in all these companies.

However, the ceramics industry is approaching a worrying period of uncertainty. The European Commission published its legislative proposals for the emissions trading system phase 4 in July 2015. These proposals cover the period from 2021 to 2030 and propose a target of achieving at least a 40% reduction in EU greenhouse gas emissions by 2030. The key issue for ceramics within the EU ETS proposals is carbon leakage, notably the evaluation of industries so that they are deemed either at risk or not at risk of it. Some sectors are likely to meet the proposed carbon leakage quantitative threshold, but the situation for other sectors, mainly the heavy clay industries and particularly those that produce bricks, clay roof tiles and clay pipes, is less clearcut, which is why I felt there was a need for this debate.

The UK Government recently announced their position on the EU ETS phase 4 and suggested that free allowances should be focused on only a handful of sectors, with other sectors receiving a lower-tiered proportion. The ceramics industry is extremely concerned by this tiering proposal, as ceramic manufacturing sites would need to purchase significantly more allowances. Indeed, it is predicted that heavy clay producers such as those in my constituency would have to buy all their carbon allowance after 2027. A number of ceramic manufacturers have said that that charge alone is likely to exceed their profits.

As part of its Ceramic EARTH campaign, the British Ceramic Confederation has used figures from the Department of Energy and Climate Change to estimate that UK heavy clay construction product manufacturers will pay more than £40 million by 2030 under this proposal, which equates to almost £1 million per year per factory on average.

Clearly this situation concerns me and many other people, because businesses, jobs and investment are at stake. Therefore, I ask the Minister to continue to look at this proposal, which is for a system that supports only a few energy-intensive industries at the expense of many others. I genuinely fear that the UK proposal will burden businesses with very high extra costs. In fact, energy costs and climate-related taxes already make up around 30% of a brick maker’s production costs, and I fear that this proposal will only add to the issues that they face.

I am sure that others in Westminster Hall today are aware that there is a growing demand for housing in this country—we often discuss and debate it in the Chamber. Construction of houses is at an eight-year high and therefore the demand for materials is growing too. Brick is the most popular cladding material for building walls, with over 80% of new homes using bricks. Brick is unmatched for its durability, low maintenance costs, aesthetics and lifetime sustainability.

I recently had the pleasure of visiting one of the brick factories in my constituency and it was an inspiration to follow the production of bricks, from the clay pit behind the factory all the way through to the finished product at the end. It was only when I stood on top of the huge kiln that I really appreciated just how much energy goes into such large kilns to produce bricks for us.

[Angela Smith (Penistone and Stocksbridge) (Lab)]

The point that the hon. Lady made about the sustainability of the industry is a good one, and she made it well. Clay pipe making is very prominent in my constituency—90% of the UK’s production of clay pipes takes place in my constituency. Of course, clay pipes are very sustainable and very long-lasting, with a life of well over a hundred years. Does she agree that, although other forms of production are of course valid and important, we ought not to forget the importance of such manufacturing capacity?

[Wendy Morton]

The hon. Lady makes a very valuable point. I will focus more on bricks, because they are produced in my constituency, but I appreciate and understand that this issue is not only about bricks but about clay pipes. When we look around the country, we often hear stories about, for example, the sewers under London. They have been in place probably for centuries, using British-manufactured clay products, pipes, bricks and lots of other things as well. I thank her for making that point.

To meet the UK demand for new housing, we will need a 60% uplift in clay products for over a decade. Unfortunately, rising demand for bricks and clay roof tiles has been met by unprecedented levels of imports. We need to encourage and focus on investment here in the UK, and consider future innovation. In 2014, brick imports accounted for 25% of sales in this country, representing a direct loss of around £80 million per year for the UK economy. The rising rate of imports of heavy clay from outside Europe shows how the EU ETS phase 4 will not really work if the industry loses its full carbon leakage status.

[Jim Shannon (Strangford) (DUP)]

The hon. Lady is setting a very important scene. I do not have any clay making or ceramics works in my constituency, but I see the issue that she is raising. Surely there is a very simple solution. On 23 June, vote no and get out, and we will not have to be under the regulations that she has referred to.

[Wendy Morton]

I am grateful to the hon. Gentleman for his intervention. I happen to disagree with him in terms of this debate. In fact, I have yet to declare my position on Europe, but it will become clearer later today.

The UK has some of the most energy-efficient manufacturing plants in the world. Specific energy consumption—in other words, energy efficiency—in the entire ceramics sector has improved by around 30% in just over a decade. To do this, hundreds of millions of pounds have been invested to make many UK plants as energy-efficient as is currently possible, and yet they could all be forced to buy all of their carbon allowance if the tiering proposal is accepted. I ask the Minister this simple question: is that fair?

The uncertainty in the industry caused by the proposals and the rise of imports means that future investment is becoming difficult and unsteady. It will make the UK even more vulnerable to higher carbon non-EU imports. We need stability and continuity. As someone who comes from a business background, I know how important that is for businesses from all sectors. It is only through stability and continuity that they feel safe and secure in investing in the future.

[Caroline Nokes (Romsey and Southampton North) (Con)]

I also congratulate my hon. Friend the Member for Aldridge-Brownhills (Wendy Morton) on securing this important debate. Michelmersh in my constituency is a fantastic local brick maker. It would always make the point that it wants continuity and certainty so that it can make investment decisions that ultimately mean that jobs stay in the UK and do not disappear to China.

[Wendy Morton]

My hon. Friend makes an important point. The subject of the debate is important, because behind it are jobs and our local economy. I do not wish to see de-industrialisation. The UK has a proud industrial history. We should also recognise that importing products from outside the EU would defeat the point of the emissions trading system. Overall, manufacturers outside the EU are not as well regulated. The electricity generation and the fuels used are more carbon-intensive, and the transportation of goods to market emits additional carbon.

As I said, the matter of housing is frequently raised in the House. The British Ceramic Confederation estimates that the Government’s programme of house building has the potential to create more than 3,000 direct ceramic manufacturing jobs in the UK and give a big boost to the sector and GDP. However, that is not being realised because of the threat of carbon leakage loss and the uncertainty that brings.

Turning to energy costs, brick makers in the UK pay about 80% more for their electricity than the EU average price, according to Eurostat. Despite much mention of the renewables compensation scheme for energy-intensive industries, brick makers are not compensated at all in the UK for renewables costs. I am sure my right hon. Friend the Minister will know that seven ceramic manufacturers in the UK are likely to receive renewables compensation, in contrast to more than 100 German ceramic and clay sites. Clearly we do not have a level playing field, and we need one.

[Robert Flello]

Given that a lot of the players in this market that have factories in the UK also have factories in such places as Germany, surely one pressure comes from saying to those companies, “You can get compensated in Germany. Put your production in Germany, not the UK.”

[Wendy Morton]

The hon. Gentleman is absolutely right. At the end of the day, I want a level playing field for our industries in the UK so that we can compete. We need to extend the number of companies that the compensation covers. I am pleased to note that the hon. Member for Stoke-on-Trent North (Ruth Smeeth) is here today. She is chair of the all-party group on ceramics. I am sure she will make reference to and, I hope, welcome the Chancellor’s announcement of the ceramic valley enterprise zone status in her constituency. That is welcome news, and I am sure she will have more to say on that, but we need the right energy and carbon policies to unlock investment at this critical time when we continue to secure the country’s economic recovery.

The Government have set a key target in their construction strategy of a 50% reduction by 2025 in the trade gap between total exports and total imports for construction products and materials. Ceramics and bricks can make a real contribution to that target, but that will happen only if we have a level playing field that enables us to compete.

The ceramics industry does not just face issues within Europe. As a result of dumped imports, between 2006 and 2011 a huge number of direct jobs were lost in the ceramic tableware and kitchenware industry within the EU as Chinese exports tripled. Since the EU anti-dumping measures were introduced in 2011 for tiles and in 2013 for tableware, the industry has stabilised its production, brought manufacturing processes back to the EU and created jobs and investment opportunities, including with clay and other materials suppliers.

The ceramics industry is, I fear, one of the most vulnerable to overcapacity in the Chinese economy. If market economy status is conferred on China by the EU, despite it only meeting one of the five necessary criteria, it will make the maintenance of adequate and meaningful anti-dumping measures, which currently protect tiles and tableware, impossible, the progress the industry has made since 2011 will be lost, and the industry will once again be put at risk. It would also further add to the uncertainty the sector is facing. What assessments have the Government and the Minister made of the impact of market economy status for China on the ceramics industry? Will they continue to listen to the views of the industry? Colleagues in the European Parliament recently rejected MES for China in a plenary vote.

I come from a business background. I believe in manufacturing. Businesses need continuity and stability to invest, innovate and thrive. As a country, we cannot decarbonise by de-industrialising and shifting our carbon emissions to another part of the world. Will the Minister look seriously at this issue? I want our industries to prosper and thrive. The ceramics industry needs competitive energy prices and the rejection of market economy status for China, but above all it needs a level playing field. That is why I am asking the Government to recognise the strategic importance of the ceramics industry and, in particular, bricks, pipes and roof tiles. I am sure that other Members will mention other products, too, and I leave that to them. We need the Government to look at today’s industries to see how they can be best be supported to thrive in tomorrow’s markets.

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[Craig Tracey (North Warwickshire) (Con)]

It is a pleasure to serve under your chairmanship, Mr Chope. I congratulate my hon. Friend the Member for Aldridge-Brownhills (Wendy Morton) on securing this debate.

I shall focus on the EU emissions trading system policy, which has already been highlighted but is of particular concern to Wienerberger, a brick manufacturer based in Kingsbury in my constituency. Like my hon. Friend the Member for Aldridge-Brownhills, I had the chance to stand on top of the kiln when I visited the company recently, which was quite exciting. Wienerberger has 13 factories throughout the country that produce bricks and roof tiles. It is employs 1,165 people in the UK. Its Kingsbury factory alone produces 40 million bricks per annum, which is enough to build 5,000 new homes.

Wienerberger’s specific problem is the proposal concerning the future carbon leakage policy. As has already been pointed out, and as I know the Minister is aware, carbon leakage in this sense refers to the relocation of UK production to locations where it is cheaper to manufacture because of environmental policies and/or lower energy costs. The direct result is a loss of investment and jobs from the UK economy. In EU ETS phase 3, ceramic sector installations, which include brick and clay roof tile factories, are deemed to be at risk of carbon leakage. As a result, factories receive a proportion of allowances based on the average of the top 10 performers across the EU in that sector, free of charge. If, as has been proposed by the UK and France, a tiered approach to carbon leakage risk is adopted in phase 4, it is likely that the ceramic sector will be reclassified as no or low risk and will thus receive significantly less free allocation.

[Wendy Morton]

Does my hon. Friend agree that with the increased demand for housing, we should be looking at ways to support the brick manufacturing industry?

[Craig Tracey]

My hon. Friend pre-empted part of my speech. She is absolutely right that we need more houses, and that it makes absolute sense for the bricks for those houses to come from local businesses in the UK.

The loss of the free allocation I have described will, when combined with an escalating market price for carbon allowances, significantly increase the cost of production. Meanwhile, competing construction materials, such as cement, will retain free allocation, creating market distortion. The situation is particularly acute in the UK as the carbon price floor, a UK-only policy instrument, adds further costs to the EU ETS carbon price for power producers. That additional cost is being passed on to businesses via electricity prices, with manufacturers being unable to pass them on to customers. Countries such as Germany and Italy are compensating for renewable electricity charges, but the UK is not. That further reduces the competitiveness of the UK brick and clay roof tile industry.

Wienerberger has factories across Europe, including in countries with significantly lower electricity costs than the UK. Any increase in UK production costs makes future investment in its UK factories far less attractive than investment in other European countries.

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[Mary Robinson (Cheadle) (Con)]

It is a pleasure to serve under your chairmanship, Mr Chope. I am pleased to have the opportunity to speak in this debate, and I congratulate my hon. Friend the Member for Aldridge-Brownhills (Wendy Morton) on securing it.

As Members know, in the autumn statement the Government committed to building 400,000 new homes in this Parliament. I am pleased that brick manufacturers want to play their part in achieving the Government’s ambitious goal. Yet with that ambition comes a need for the steady production and supply of building materials for Britain’s new homes. When Britain last built 200,000 new houses a year, it required stocks of more than 1 billion bricks and the production of almost twice that number to fulfil orders and keep the prices of basic construction materials stable. Although I am pleased that figures from the Department for Business, Innovation and Skills show an increase in brick production, and that the Office for National Statistics and the chair of the Brick Development Association agree with those figures, we need to ensure that the brick manufacturing industry and the other elements that go into building our homes are recognised. They must be appreciated as an important staple for house building and increasing market values.

[Wendy Morton]

Does my hon. Friend agree that, as we seek to build more houses, the construction industry needs a continuity of construction materials? That includes bricks, roof tiles, pipes and everything else that is required for constructing a home.

[Mary Robinson]

I totally agree. We need exactly that package if we are to achieve this ambitious target.

I welcome the British Ceramic Confederation’s ceramic EARTH campaign, which aims to raise the profile of the industry’s important contribution to the UK economy. To be able to compete internationally and secure jobs, we must ensure that all sub-sectors receive mitigation measures to fully guard against the leakage of carbon investment and jobs outside the EU, and there must be action to lighten the cost of UK/EU energy, climate and environmental policies, which harm the sector’s ability to remain competitive on the international stage.

I share an interest with my hon. Friends the Members for Aldridge-Brownhills and for North Warwickshire (Craig Tracey): my constituency is home to the national headquarters of Wienerberger, the UK’s third largest brick manufacturer. Wienerberger is responsible for producing all the elements of construction. It is the only multinational producer of clay block for walls, clay roof tiles, ceramic pipe systems, and concrete and clay pavers. It provides what the firm calls a “whole building envelope”.

[Wendy Morton]

My hon. Friend is talking about one of her local companies that produces bricks. Does she accept that the many companies across the country that manufacture such products, from small family-run companies to the much bigger national and international companies, are all affected by the EU ETS and the market economy status?

[Mary Robinson]

That is exactly right. They have an all-pervasive influence.

Innovation and speed are important in meeting the Government’s targets. Innovation can drive down construction time. For instance, Porotherm—Wienerberger’s clay block walling system—has been used to build an apartment block complex in South Harrow, which is currently being finished. It has reduced the construction time by 20% from 15 to 12 months. One floor is rising every eight days, readying the roof for installation within 10 weeks. That new method of brick production has reduced overall construction time and speeded up access to home ownership. Therefore, where there is demand for good-quality housing, and where there are brownfield sites with appropriate planning permission for construction, we should recognise that developments in the brick industry enable quicker construction and allow properties to be released much sooner than the market is currently used to.

It is clear from Members’ contributions that investment in new capacity is needed to help the industry with the production of bricks. That should be at the forefront of our concerns. As Members have mentioned, in the EU ETS phase 3, all ceramic sectors and sub-sectors are deemed at risk of carbon leakage for direct carbon costs, but they will not be compensated for indirect carbon costs. The key issue for phase 4 legislation is to guard against the leakage associated with indirect and direct costs. However, there are shortcomings to those proposals—most notably, an insufficient number of free allowances for the industry. Thus there would be a uniform percentage reduction, known as the cross-sectoral correction factor, to keep within the minimum. To avoid the CSCF, the introduction of a tiered approach, although helping a limited number of sectors, could be damaging to other sectors. Under this tiering, ceramic installations would see a significant reduction in the level of free allocation received. That is worrying for the firms that are involved in the production of bricks, roof tiles and drainage pipes, which may cease to receive free allowances. That will make investment in UK operations challenging and undermine much needed investment in capacity.

The UK ceramic industry is steeped in heritage. Now more than ever it is vital to Britain’s growth. As we seek to build more homes, we should remember that good homes are built on strong foundations, and we should do all we can to ensure that those foundations are built on a strong brick and ceramic manufacturing industry.

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[Margaret Ferrier]

Sorry about that—I mean the hon. Member for Penistone and Stocksbridge (Angela Smith). I should have known that, because we have met many times to talk about heavy industry—my apologies.

The hon. Member for Stoke-on-Trent South (Robert Flello) spoke about ancillary firms also being important, and kiln production. He spoke kindly about Wedgwood, to mention it again, and that we have to be careful about market economy status for China, which has counterfeiting and dangerous chemicals in some products.

[Wendy Morton]

The hon. Lady always speaks with such passion about the industries in her constituency. Does she agree that we need to look not only at the EU emissions trading scheme, but at market economy status for China? Only by having a level playing field can we encourage businesses to do their bit, which is to invest and innovate for the future.

[Margaret Ferrier]

The hon. Lady makes a good point. We will hear from the Minister in her response to all our points. We have heard many times that market economy status will not mean that we cannot bring anti-dumping cases, so I am interested to hear how she will respond to everyone’s concerns.

We heard from the hon. Member for Stoke-on-Trent North (Ruth Smeeth) that there is more to ceramics than brick alone; it includes tableware. A tile manufacturer is a big employer in her constituency, and it has major concerns. The brick and tile industry has bases in north Africa and Turkey, where production costs are much lower, so we have to support our ceramics in the UK. She also made mention of labour costs, which are lower in those countries, although employees there can be exploited.

The hon. Member for North Warwickshire (Craig Tracey), which includes Bedworth, spoke about his brick and tile manufacturer in Kingsbury, which employs 1,100—

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[Wendy Morton]

In the short time that I have, I thank you, Mr Chope, for keeping us in good order this afternoon, and I thank the Minister for coming along and listening to us. I was pleased to hear that she is engaging proactively on some of the issues, and I urge her to continue to listen to the sector. I thank all the Members from across the country who have participated in the debate.