Business Secretary Vince Cable has warned that spiralling energy costs are becoming a “big problem” for British industry.
Energy costs have been at the centre of furious public debate in recent months amid sharp increases in household bills and falling incomes.
But industrial firms face the largest energy bills of all, threatening to derail a marked recovery in the manufacturing sector and weigh down the wider economy.
“Energy-intensive industry has got special problems arising from British energy costs,” said Cable at a an event to launch a report by industrial giant Tata Steel Europe and consultancy firm PricewaterhouseCoopers (PwC) which calls for a foundation industries minister in the UK.
Cable added that the carbon price floor, a tax on fossil fuels used to generate electricity that energy firms pass on to consumers, is “pricing in a disadvantage to UK producers”.
“We recognise that and I think the core of the industrial strategy for the foundation industries often revolves around that point,” he said.
Foundation industries account for 25% of the manufacturing sector. They provide many of the materials needed for other firms in the sector as well as construction businesses. Productivity in foundation industries firms is 136% above the UK average and they turnover £69bn annually.
High domestic energy costs harm the competitiveness of UK firms against their rivals. Manufacturers’ output makes up half of the country’s exports, but they face energy costs that are as much as 30% above their European rivals.
“If, as a result of high energy costs or other burdens, they become uncompetitive we will see more of them disappear from the UK as emerging economies thrive,” said Terry Scuoler, chief executive of EEF, the manufacturers’ organisation.