Andy Burnham must maximise the North Sea if he is serious about reviving British industry, the chemicals sector says.
Carbon costs and high energy prices mean chemical firms are competing “with one hand tied behind their backs”, according to Steve Elliott, chief executive of the Chemical Industries Association.
He urged Mr Burnham to fulfil his commitment to reindustrialise the UK, telling the new PM: “It can’t come quickly enough.”
A “promising signal of intent” would be the development of North Sea oil and gas, Mr Elliott said.
Chemical firms employ 135,000 people directly, with a further 500,000 roles dependent on the sector.
The industry has annual exports of £70billion. But it has warned that it is in “the fight of its life” and risks becoming the poster child for “decarbonisation by deindustrialisation”.
It faces “unrelenting competitiveness challenges”, the CIA said.
Emissions from the sector have been cut by 60 per cent in the last five years – but more than 90 per cent of this reduction comes from plant closures, according to the CIA.
In its latest survey of members, it found that “crippling energy costs” were preventing expansion.
Andy Burnham has been urged to fulfil his commitment to reindustrialise the UK
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Almost half (44 per cent) of companies reported that investment had been delayed, reduced or cancelled altogether, with energy costs “the dominant issue”.
The survey also revealed that for the past 12 months, the UK has had a persistent chemicals trade deficit, with monthly imports exceeding exports.
Nearly three quarters (73 per cent) said their UK operations were less competitive than overseas sites, particularly the US, China and Southeast Asia.
Brexit was also an issue, with eight in ten firms (82 per cent) saying it “has not worked for their business”.
A ‘promising signal of intent’ would be the development of North Sea oil and gas
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Mr Elliott, said: “As challenging as our international competitors and wholesale energy prices are, the huge frustration for UK chemical businesses is the extent to which UK energy and carbon policy is forcing them to compete for investment and sales with one hand tied behind their backs.
“Our new Prime Minister’s stated commitment to ‘reindustrialisation’ can’t come quickly enough to enable the chemical industry to play its full part as a recognised foundation sector within the Government’s industrial strategy.
“Hopefully, that starts with a positive signal of intent on maximising our own domestic energy security and supply, with the continued development of North Sea oil and gas.
“Action here will help secure the bridge to a cleaner, cheaper energy future through strengthening our industrial competitiveness, protecting jobs and reducing reliance on imports in an increasingly volatile world.”
CIA Economist, Léa Charbonnier, said: “We are concerned about the knock-on impact to the wider economy from the unrelenting competitiveness challenges faced by UK chemical businesses.
“The latest available data show that, in 2023, the sector supplied £16 billion of essential products to other industries, with more than 44 per cent of its output purchased by other manufacturing sectors.
“When the chemical industry struggles to invest and grow, the effects are felt well beyond our own sector.”
The Government recently pledged £350million to support the chemicals sector and it said a new relief scheme would help lower energy bills for thousands of manufacturers.
A spokesman said: “Our chemical industry is vital to the UK’s success and economic growth, but we recognise the challenges the sector faces on the cost of energy, which is why we have announced £350million of support for strategically important chemicals producers.
“Our new British Industrial Competitiveness Scheme will also help tackle this by reducing electricity bills by up to 25 per cent for over 10,000 manufacturing businesses, while our Supercharger scheme will cut electricity costs for hundreds of our most electricity-intensive businesses.”
It has been reported that Mr Burnham is ready to move quickly with decisions on two controversial oil and gas fields in the North Sea.
Work at Rosebank, Britain’s largest untapped oil field, and Jackdaw, a gas field, have been halted due to legal challenges on climate grounds.
Decisions on whether work can restart at either rest with the Government.
Energy Secretary, Miatta Fahnbulleh, was in Aberdeen yesterday where she met with bosses, unions and workers, who she said “have helped power Britain for decades”.
She said: “The North Sea remains a vital national asset and our pragmatic approach will continue to support jobs, growth and the community.”
David Whitehouse, of trade body Offshore Energies UK, said her choice of Aberdeen for her first visit was “an important signal, recognising the central role this city and its workforce continue to play in delivering our energy future”.