Britain's Heavy Industry on the Brink: Government Intervention to Prevent Collapse

Britain's energy-intensive industries are facing catastrophic decline due to soaring energy prices, with production levels falling by as much as 66% since 2021. The sector, which employs over 400,000 people, is a significant contributor to the UK economy, with a turnover of £170 billion. However, the industry is facing unprecedented stress, with European competitors also struggling with high energy costs and Chinese competition. Britain's electricity prices are 44% higher than France's and 300% higher than the US, making it the least competitive industrial base in the developed world.

Key Takeaways:

• Energy-intensive manufacturing production in late 2024 was just 66% of what it was at the start of 2021, with paper and petrochemical production declining by nearly 30%, inorganic non-metallic production dropping over 30%, and basic metal and casting production declining by almost 50%.
• The energy-intensive industry has a turnover of £170 billion and employs over 400,000 people, with 60% of those in the North and Midlands.
• An average chemical industry worker earns three times the weekly wage of a hospitality worker, twice that of someone in retail, and 130% that of someone in education.
• The government takeover of British Steel's blast furnace plant at Scunthorpe is likely to lead to formal nationalisation, with the same fate possible for Sanjeev Gupta's speciality steels furnace in Rotherham.
• The British steel sector is dependent on government support, with £500 million granted to Tata Steel's Port Talbot furnace to install electric furnaces.
• Nationalisation is a viable option, but it will require policymakers to address the contradictions between economic growth and the prohibitive cost of onerous regulations and Net Zero.

Statistics:

• 66% decline in energy-intensive manufacturing production since 2021
• 30% decline in paper and petrochemical production
• 30% decline in inorganic non-metallic production
• 50% decline in basic metal and casting production
• £170 billion turnover of the energy-intensive industry
• 400,000 people employed in the energy-intensive industry
• 60% of those employed in the North and Midlands
• 44% higher electricity prices in Britain compared to France
• 300% higher electricity prices in Britain compared to the US
• £400 million cost of exemptions for heavy industry in 2023
• £30 per megawatt hour reduction in electricity costs from exemptions
• £260 per MWh industrial electricity price
• 10% of industrial electricity demand exempted under current schemes
• £500 million grant to Tata Steel's Port Talbot furnace to install electric furnaces

Sources:

• The Office for National Statistics (ONS)
• The Financial Times
• The Telegraph
• The Guardian