High energy costs, green packaging levies and a lack of Government support could shatter the glass sector and move manufacturing abroad, industry experts warn.
The sector is “at a crossroads”, with producers facing decisions on whether to replace gas furnaces with electric ones, in line with the UK’s Net Zero ambitions. But, because the UK has some of the highest electricity costs in the developed world, the sums do not add up, said trade body the British Glass Manufacturers’ Confederation.
Some manufacturers have already opted to build new furnaces in mainland Europe, where they are offered greater financial support, it said. Meanwhile, imports from countries with lower carbon costs are denting domestic trade, said Paul Pearcy, Federation Manager at British Glass.
“It shouldn’t be cheaper to transport empty glass bottles or sheets of glass from China and Turkey to the UK than it is to produce them in the UK”, he said. He called for a “level playing field” with Europe to keep British firms competitive, warning plants could close without action.
Industry minister Chris McDonald acknowledged the difficulties facing glass. He is visiting manufacturers this week to hear their concerns first-hand.
Last week, unions warned of the threat that the Extended Producer Responsibility charge posed to the sector. The levy means brands and businesses, rather than councils, have to pay for collecting and disposing of waste.
Because the scheme charges by weight, glass is disproportionately affected. The GMB union warned unless the fees – the highest rates in Europe – are reduced, factories could close, putting thousands of jobs at risk.
The EPR affects container glass, such as bottles and jars. Mr Pearcy said it was a critical and immediate threat but just one of the issues facing the wider £2.1billion sector, which employs 6,000 people directly and 120,000 people in the economy at large.
Industry minister Chris McDonald acknowledged the difficulties facing glass and is scheduled to visit manufacturers this week
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PAAlong with sectors such as ceramics and cement, glass is classed as a foundational industry. This means they supply the basic materials and service the economy is built on, making them core for any industrial strategy.
Yet, as is the case with many energy-intensive industries, the cost of power is a key concern. Mr Pearcy said: “The sector is currently at a crossroads as many of the furnaces are due for rebuilds before 2030 and, in most cases, these are likely to be considering either fully electrifying or hybrid technology.”
These decisions are crucial because of the lifespan of the furnaces, he said. If they were not converted now, “the higher carbon technology will be locked in beyond 2040”.
Nevertheless, Mr Pearcy warned: “Adopting electricity now is not financially viable due to the operating costs versus natural gas and versus international competitors. So, if the glass sector cannot secure competitive electricity costs and support with connection costs and timescales, it could severely limit the sector’s chance of reaching Net Zero and could result in those sites not being rebuilt in the UK.”
Nippon Electric Glass shut its plant in Hindley Green, Wigan, citing high prices for raw materials, energy and logistics
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He said Britain’s glass sector is only asking for a “level playing field” with European competitors. Large glass manufacturers are eligible for the British Industry Supercharger scheme exempting them from a range of green levies and grants compensation against 90 per cent of network charges.
Even with this discount, costs are higher than those in Europe, said Mr Pearcy. Further, not all glass manufacturers were eligible for indirect cost compensation – a separate scheme that helps offset carbon costs in electricity.
In the European Union, both flat and container glass are eligible. Mr Pearcy called for steps to bring power prices down.
One route, he said, could be a “contracts for difference” scheme that sets a benchmark price for electricity. When costs were high, as they are now, the Government would pay manufacturers the difference.
However, when they come down – a shift predicted by the Government as more renewable energy sources come online – the money will be returned. He also called for schemes to help manufacturers invest in the hybrid or electrical equipment that is vital to hitting Net Zero.
This help, for both capital and operating expenditure, is available to European competitors, especially Germany and France. Mr Pearcy said: “The sector needs similar support schemes that are offered in mainland Europe to ensure they remain internationally competitive. We are not asking for anything more than what other countries in mainland Europe get. We just want a level playing field for UK manufacturers and to ensure that the UK is attractive for investment. We need support for operating and capital expenditure, to adopt electric and hybrid furnaces and to get the connections required in the right timeframes to allow the adoption of low carbon glass manufacturing. The technology is technically viable, as it’s been adopted throughout the EU, where both electric and hybrid technologies are operating.”
UK factories are already feeling the strain. In May this year, Bristol Blue Glass closed its doors, saying increasing rental costs and soaring fuel prices had created “overwhelming” financial strain.
The company was founded in 1988 to revive Bristol’s historic blue glass-making tradition. In June last year, Britain’s largest fibreglass factory closed, at the cost of 250 jobs.
Nippon Electric Glass shut its plant in Hindley Green, Wigan, citing high prices for raw materials, energy and logistics, among other reasons. The factory sits in the Makerfield constituency, where Andy Burnham won his seat recently.
The GMB described the closure as a “bitter betrayal” of the factory’s 250-strong workforce. Asked if he feared more closures, Mr Pearcy replied: “Yes, without action to level the playing field with the EU in terms of support on electricity and capital costs. The UK is the outlier and is not offering the same level of support as other countries in the EU. There are a number of furnaces that need rebuilding, and there is a risk that those companies decide not to invest in the UK and decide to move that production to the EU, where there is more support for those investments and lower operating costs.”
He said greater protection was also needed against “carbon leakage”, where production is moved from a country with stricter climate policy to one with weaker rules. Mr Pearcy said: “We are seeing increasing imports of glass into the UK, which is impacting on the glass industry and reducing the demand from UK manufacturers. This is a typical case of carbon leakage – it shouldn’t be cheaper to transport empty glass bottles or sheets of glass from China and Turkey to the UK than it is to produce in the UK.”
Bringing down energy costs was one solution, he said. Another would be trade quotas to encourage domestic production.
He said: “The UK still needs the glass for packaging and windows for buildings, so surely, we should continue to manufacture in the UK and keep the jobs here. It’s best for the environment and best for the UK economy. If furnaces close and production moves overseas, communities lose well-paid industrial jobs and the UK loses manufacturing capability that may never come back. The Government needs to offer competitive energy costs and adopt trade protections to protect the UK Glass Sector.”
Industry Minister Chris McDonald said: “I know UK glassmakers are facing difficulties and the situation in the Middle East is adding to their costs, which is why I’m visiting glassmaking businesses this week to hear those concerns firsthand. This Government has taken action to help reduce electricity bills by up to 25% for over 10,000 manufacturing businesses as well as our Supercharger scheme to cut electricity costs for hundreds of our most electricity-intensive businesses.”
The Government is understood to be working with the Trade Remedies Authority to deal with unfair overseas competition. The TRA is currently conducting anti-dumping and anti-subsidy investigations into imports of glass containers from China and Turkey, to establish whether unfair trade practices are injuring domestic manufacturers.