Green taxes stoke up steel plant jobs crisis
‘Northern Powerhouse’ is dealt a blow as Ministers are blamed for 3,000 redundancies
STEEL bosses have blamed green taxes levied by the UK and European Union for tipping a steel plant into crisis threatening 3,000 jobs.
The plant in Redcar, Teesside owned by Thai industrial group SSI, is on the brink of closure in what is a high unemployment region.
Managers at the plant said on Friday that they had halted production amid mounting financial losses.
SSI UK failed to pay loans totalling £80million to lenders in June and was given an extension until the end of this month. It is believed still to be in discussions with a consortium of eight banks, but accountant PwC is understood to be on standby to handle an insolvency.
SSI bought the mothballed plant from Indian firm Tata Steel for £330million in 2011, restarting it in April 2012, when it produced its first steel slab in two years.
But it lost £194million in 2013, and the price of steel has plunged from £320 a ton to £190 in the past year. SSIUK owes the banks £530million.
The crisis is a blow to the Government’s concept of a Northern Powerhouse – its plan to devolve powers to the North of the country to boost its economic performance.
James Wharton, Minister for Local Growth and the Northern Powerhouse, said: ‘There is no sugar-coating it, this is bad news for the people of Teesside and a difficult day for those linked to the Redcar plant.’
However, the MP for Stockton South pointed to local success stories, including a recent £100million investment in the Nissan car plant in Sunderland, the go-ahead for Sirius Minerals to dig a potash mine near Whitby, Yorkshire, and the opening of a Hitachi train factory in Newton Aycliffe, County Durham.
However, steel production across the UK has been hit by green taxes, high energy costs, the strength of sterling and cheap imports. The Government has promised to ask China not to dump cheap steel on the UK market when Ministers meet Chinese leaders next week.
UK steel producers have to pay additional environmental taxes following Chancellor George Osborne’s introduction of the carbon price support mechanism in 2011. This is a tax for every ton of carbon dioxide they produce and this is in addition to the taxes levied by the EU under its emissions trading scheme.
The Government has capped it at £18 per ton of carbon dioxide emitted. Nonetheless, it has estimated it will raise about £1 billion a year from the tax – money which goes straight to the Treasury rather than to environmental programmes. All firms in the EU are entitled to partial compensation for green levies to keep them competitive, but British firms are still waiting for compensation. A spokesman for SSI UK said compensation would undoubtedly have helped its position.
Jeremy Nicholson, director of the Energy Intensive Users Group, said: ‘Today heavy industry might pay £80 per megawatt hour for electricity. More than £30 of that is attributable to renewable energy costs and the carbon price floor tax.
‘Renewable costs are set to be 50 per cent higher by the end of the decade. There are other steel companies – and chemical, glass and paper makers – that are experiencing difficulties partly as a result of these taxes. Any energy intensive industry which is looking at investing in the UK looks at these costs and may think again.’
The Government has said it will pay compensation to industries affected, but not until April next year. Payments have to pass EU state aid rules and the UK’s scheme is still under consideration.
Nicholson said: ‘Other European countries, such as France and Germany, have been well ahead on this. Germany has had its compensation scheme in place from the start.’
The steel industry has warned that unless the Government acts quickly the future of steel production is under threat in the UK.
The Government has said it is committed to paying compensation to heavy industry, arguing that it has paid £130million to energy intensive industries, with £47.7million of that going to the steel industry.
Wharton said he was constrained by EU rules on state aid and was unable to speed up the compensation process. He added: ‘We are doing all we can to offer support to SSI UK. We are meeting representatives. But it is in trouble because the price of steel has fallen 40 per cent.
Gareth Stace, director of industry body UK Steel, called on Ministers to cut business rates for energy intensive firms. He said rates are five to ten times higher in the UK than in France or Germany.
‘If they don’t act decisively, then the damage to one of the most important industries underpinning our entire manufacturing sector will be irreversible.
‘We need a clear indication from Government that it will honour its commitment to compensate steel and other energy intensive industries from the cripplingly high cost of energy – and do so earlier than April next year. Failure to do this could mark a potentially disastrous tipping point for the industry.’