APPENDIX 9
Memorandum submitted by Chemical Industries
Association
QUESTION 1—MARKETING
UK PLC
Better regulation
1. The issue of over implementation of EU
legislation is a significant problem for the UK chemical industry.
It costs our members a great deal in cost of compliance, administrative
burden, competitiveness and opportunities lost as a result. It
is also off putting to potential investors to the UK chemical
industry.
2. An example of UK "gold plating"
of EU legislation is the European Ambient Air Quality directive
called for a 1-hour and 24 hour limit (and therefore monitoring
at that frequency) for SO2 emissions to be achieved by end of
2005. However, the UK devolved administrations decided to "gold
plate" this EU legislation by reducing the limit from one
hour to 15 minutes.
3. Sites located within Air Quality Management
Areas are competitively disadvantaged compared to other EU Sites
that only have to comply with the 1 hour and 24 hour limits. A
further example of gold plating regarding the definition of waste
is attached as an Annex.
4. We believe that when the UK Government
is implementing EU legislation it should:
— Be consulted upon to fully asses
impact on industry.
— Be assessed for financial impact.
— Be bound by cost compliance limits.
— Be economically, environmentally
and socially sustainable.
— Be evenly and universally applied.
Energy
5. The chemical industry is a truly global
market place. Many chemical companies that manufacture in the
UK are foreign headquartered or export a large percentage of their
production. This means the UK competes with other countries to
have chemical manufacturing based in this country. The most immediate
threat to investment in the UK for the manufacturing of chemicals
in the UK is the still high cost of energy, specifically the differential
in cost between the UK and competitors in Continental Europe and
further afield. Companies have recently been unable to rely on
security of supply and stable competitive prices for energy—essential
for the energy intensive processes involved in chemical production.
6. Prices in the forward gas market for
last winter had for many months been wholly uncompetitive for
intensive energy users in the UK—roughly twice the prices
available on the Continent. UK manufacturers had little option
but to rely on the "spot" gas market.
7. During November an early cold snap and
the failure of existing import infrastructure to bring in gas
at anywhere near capacity led to a rapid withdrawal of gas from
the UK's limited storage, resulting in spot prices rising to record
levels. The market remained nervous—and prices stayed high—for
the rest of the winter, even after imports had began to flow in
greater quantity by the beginning of 2006. Another cold spell
in March caused new record spot prices.
8. There were enforced prolonged shutdowns
or reduced rates of operation at plants manufacturing ammonia,
chlorine, and many other chemicals, as well as other commodities
like glass and bricks. Many plants, in particular several specialist
glass producers, have closed permanently.
9. Many chemical sites switched production
to plants in other countries (the majority of UK chemical plants
are in foreign ownership). Some companies passed on the high energy
costs to UK customers, spreading the pain further, but for many
chemicals, markets and pricing are global, giving no opportunity
to recoup higher costs.
10. The inability of the UK markets to offer
a secure supply of energy at consistently competitive rates means
that the UK's reputation as a place to manufacture chemicals has
already been severely damaged, and investment has been lost or
deferred. While recent weeks have seen a welcome substantial downward
movement in wholesale gas and electricity prices, there remains
a significant cost differential with the rest of Europe.
11. We strongly urge the Government to do
everything in its power to encourage the rapid expansion of gas
storage capacity by removing blocks in the planning process and
to keep up the pressure on EU member countries to properly deregulate
their markets so gas flows in response to price signals.
12. In the long term we welcome the focus
that the Energy Review has given to the issue but now we need
the Government to set out a clear road map for the implementation
of an energy policy to give potential investors the confidence
to come to the UK.
13. The Government's energy policy should:
— Ensure long term competitive prices,
with emissions reduction policy that recognises EU and global
realities.
— Enable long term security of supply
through a sensible mix of energy sources, minimising dependence
on imports where possible, and otherwise diversifying sources
of imports.
— Preserve sufficient gas/oil as a
basic product feedstock for the chemical industry.
— Recognise the importance of efficient
base load power to industry by giving nuclear energy and clean
coal technology full consideration as part of the energy mix as
technology stands today.
— Provide incentives to encourage pre-commercial
research into new energy options.
— Encourage use of renewable energy
where reliable and cost competitive.
— Give incentives to develop technology
that reduces energy demand.
— Encourage energy saving. Industry
now accounts for only 21% of final energy consumption: attention
must also be paid to the domestic and transport sectors that together
account for 66% of consumption.
QUESTION 3—SKILLS
SHORTAGES
14. Our main concern around skills, links
to science, with it's roots in the education system. In a recent
survey of our members,
— 83% of chemical businesses did not
feel that science education is prominent enough in the UK education
system.
— 49% say the people they recruit do
not have the right skills.
— 76% reported difficulty recruiting
university leavers.
15. In the same survey, there was a lack
of appreciation of the role and use that can be made by businesses
of the Sector Skills Council.
16. Science tends to be a "lifelong
skill" so if people become interested at the early stage
s then it will stay with them. We believe the same to be true
of other areas of manufacturing. We need new and joined-up standards
and processes reflecting exactly where, we as a country want to
see the men and women who leave our education system at whatever
age from whatever institution be in terms of their understanding
and hopefully their passion for science. Right from the first
step into education until departure we have to set and then track
scientific progress.
17. Those of us in industry—on both
sides and especially the chemical industry—workers and employers
have to play our part in lifting the skill of everyone and that
includes the skill levels of every worker from Boardroom to laboratory,
from workbench to canteen from gatehouse to office. Because it
is at all levels that chemical businesses need to compete. And
there are no longer any unskilled jobs in the chemical industry.
Moving beyond science, our members also reported problems in other
areas. Technical knowledge, HSE, and problem solving were all
felt to be areas where employers had to bridge a bigger gap than
they thought they would have to. Once in the workplace, with a
spend of nearly half a billion pounds on training our companies
are committed to ensuring high skill levels but to ensure "the
pipeline' we need a different approach in the education sector
and recognize we must play our part.
18. We would be very pleased to help the
Committee further with it's inquiry, if any discussion would prove
helpful.
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