David Cameron should axe green taxes rather than “overstating” the potential of fracking if he wants cheaper energy to attract businesses to the UK, leading manufacturers have warned.
The Prime Minister on Friday put shale gas at the heart of his plans to make Britain the “re-shore nation”, saying that Europe must “embrace the opportunities of shale gas” in order to tempt businesses with “cheap and predictable sources of energy”.
But manufacturing group the EEF and industrial giant Tata Steel both warned that any benefits of shale gas in the UK were years off and called on Mr Cameron to urgently address rising green levies on energy bills that are making the UK increasingly uncompetitive.
EEF’s senior energy policy advisor, Richard Warren, said that the costs of decarbonisation policies would “ramp up” significantly between now and 2020.
“In terms of reducing energy prices, fracking is too long-term to be making any difference in the next 4-5 years. The government needs to consider the impact its policies are having on energy prices now,” he said.
Other businesses could decide to leave the UK, or make new investments elsewhere, in part due to the rising costs, he warned. “The impact of fracking would be far too late. Energy intensive industries are making investment decisions now: they can’t wait that long for government to act.”
He said the biggest way ministers could reduce energy costs would be by reducing or scrapping the UK’s unilateral carbon tax, which will equate for 10pc of manufacturers’ electricity bills by the next election and is due to rise every year this decade.
He also warned it was unclear that fracking could have any significant impact on gas prices unless the entire of Europe exploited shale gas.
“It’s important that the government doesn’t overstate that it’s going to drive down prices,” he said. “It’s very unwise for Cameron and Osborne to be thinking that it can have the same impact as in the US.”
Tata Steel meanwhile warned that the “competitive gap” between the UK and its neighbours was growing bigger every year due to green policies, while any benefit of shale could be “be many years” off.
A spokesman for the company, which employs 18,500 people in the UK said: “Developing a secure supply of competitively-priced energy is a must for any government wanting to retain and attract manufacturers. Fracking has had a major impact in the US, but it could be many years before we start to see any impact on UK energy prices.”
He said that its energy costs in the UK were already up to 50pc higher than in Germany and France.