British Glass: industry at risk from gas costs

The UK glass sector is under ever greater pressure from high gas costs, which come on top of other mounting burdens, Mr. David Workman, the director general of the British Glass Manufacturers Confeder…

The UK glass sector is under ever greater pressure from high gas costs, which come on top of other mounting burdens, Mr. David Workman, the director general of the British Glass Manufacturers Confederation, said 27 January 200. In a letter to the Financial Times, Mr. Workman complained that four UK glass facilities had recently shut down because of high energy costs. He said that SLI, the UK“s only remaining lighting manufacturer, announced the week commencing 16 January 2006 that it was going into administration. Mr. Workman was reported elsewhere as saying that while the government argued UK energy prices were still competitive for many types of user, his members did not see the UK glass sector enjoying competitive prices. One large glass company had surveyed expected energy costs in 2006 across various European countries. If the UK gas cost was set at 100, said Mr. Workman, the company expected gas costs in France to be 78, in Germany 81, in Poland 63 and in Spain 69. On electricity, if the UK was 100, France would be 56, Germany 78, Poland 65 and Spain 67. With such differentials, manufacturers might consider moving their work out of the UK to other European locations. Mr. Workman said one glass manufacturer that paid GBP 3.0 million (USD 5.4 million/year) for gas in 2003 expected to pay around GBP 9.5 million in 2006. With increases in raw material costs (raw materials such as soda ash are also produced in energy intensive processes), rises in national insurance and pension costs over recent years and high costs of environmental compliance, the glass industry was under growing pressure, Mr. Workman said. “We want the industry to remain competitive with the rest of Europe,” said Mr. Workman. “If it is uncompetitive we will see further closures.” Mr. Workman suggested that the government needs a plan B to protect industry if liberalization of the continental European energy markets does not accelerate. Liberalization, if it happened, could balance energy prices across Europe by freeing trade, making the UK more competitive. Mr. Workman said that government could consider a 100% climate change levy (energy tax) rebate for energy intensive industries. That could give the British glass industry around GBP4 million a year. Government could also offer tax concessions for energy efficiency measures and on investment aimed at controlling pollution. Government should seriously consider the burdens of environmental compliance, he said. The British glass industry employs around 16,000 in direct manufacturing and conversion and has a turnover of around GBP 2.5 billion a year (USD 4.5 billion a year), but its economic impact is larger when suppliers to the industry are taken into account. Energy minister Malcolm Wicks said in a recent written statement on a general decline in manufacturing employment that “we are aware of a few companies having reduced production in response to the very high prices since November … this will, of course, have a negative impact on UK industrial output, but in terms of overall GDP this will be relatively minor”.