Memorandum from the Tees Valley Joint
Strategy Unit (NE 04)
SUMMARY
— The Tees Valley Joint Strategy Unit is
funded by Darlington, Hartlepool, Middlesbrough, Redcar and Cleveland
and Stockton on Tees Borough Councils to develop on their behalf
a strategic Tees Valley wide policy on economic development, planning,
housing, tourism and transport. The Unit also acts as a secretariat
to Tees Valley Unlimited, a sub regional partnership with the
private sector.
— The Tees Valley economy is based on the
largest integrated process industrial complex in the UK organising
a world class petrochemicals, energy, biofuels industry, the third
largest port in the UK and a world class advanced engineering
industry. The petrochemicals industry alone contributes £3.5
billion to the UK economy and 70,000 jobs in the UK depend on
it. There is a pipeline of investment in petrochemicals/energy/biofuels
of £4 billion expected in the next five years.
— The Government's new approach to manufacturing
industries—industrial activism—is a strategic approach
to the development of manufacturing industry. The emphasis on
the low carbon economy is good news for the Tees Valley. There
is a need to ensure Government understands the important contribution
the Tees Valley can make in this key sector and contribute to
climate change. There is a concern that Government may be less
willing to take a strategic approach to dealing with important,
traditional sectors such as petrochemicals which are the bedrock
of manufacturing industry in the UK.
— One NorthEast have led the way in their
approach to innovation through setting up the Centre of Process
Innovation at Wilton to translate specific research into new commercial
products in advanced industrial processes, the low carbon economy,
the development of functional materials and plastic electronics.
CPI has a national reputation and attracted national facilities
in plastic electronics and biotechnology. The Digital City project
is encouraging innovation in digital and multi media. ONE is developing
innovation connectors at Wilton and at Digital City to support
the dissemination of innovation into the broader community.
— ONE, Tees Valley JSU, Tees Valley Regeneration,
the North East Process Industries Cluster, and the local authorities
work closely together to ensure the £4 billion pipeline can
be implemented by tackling barriers to development such as infrastructure,
helping businesses with their proposals, and taking a comprehensive
and proactive approach to obtaining statutory approvals.
— One area which is difficult to crack
is the development of high level skills for manufacturing due
to the plethora of Government agencies and the lack of flexibility
in national schemes. Tees Valley Unlimited is tackling this by
preparing a report with the key industrial sectors to identify
the demand for skills in key sectors in the Tees Valley.
1. THE TEES
VALLEY JOINT
STRATEGY UNIT
1.1 This submission to the North East Committee
on Industry and Innovation in the North East of England has been
prepared by the Tees Valley Joint Strategy Unit on behalf of the
five Tees Valley authorities—Darlington Borough Council,
Hartlepool Borough Council, Middlesbrough Borough Council, Redcar
and Cleveland Borough Council and Stockton on Tees Borough Council—and
Tees Valley Unlimited—a partnership of the Tees Valley authorities
and the private sector.
1.2 The Tees Valley Joint Strategy Unit is funded
by the Tees Valley authorities to develop strategic Tees Valley
wide policy on economic development, planning, housing, tourism
and transport and acts as a secretariat to Tees Valley Unlimited,
a partnership of the Tees Valley authorities and the private sector
concerned with improving the economic performance of the Tees
Valley.
1.3 This submission sets out:
| (a) | the place of manufacturing industry in the Tees Valley;
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| (b) | the potential for the growth of manufacturing and renewables in the Tees Valley;
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| (c) | the role of One NorthEast and Government in supporting the manufacturing/renewable energy industry;
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| (d) | how training and skills can be developed in supporting these sectors.
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2. THE PLACE
OF MANUFACTURING
INDUSTRY IN
THE TEES
VALLEY
2.1 The Tees Valley economy is based on the largest integrated
heavy industrial complex in the United Kingdom. It has six main
components:
(a) the petrochemical cluster at Wilton, Billingham
and Seal Sands is the largest integrated chemical complex in the
United Kingdom in terms of manufacturing capacity and the second
largest in Europe. An independent study by PACEC as part of the
Tees Valley City Region Business Case showed that it contributed
£3.5 billion to the UK economy and 70,000 jobs in the UK
depend on it. It is backed up by the Wilton Centre which is the
largest non-military private sector research centre in Western
Europe and the Centre for Process Innovation which incorporates
the National Industrial Biotechnology Facility and has an international
reputation in translating research into commercial products in
advanced chemical and bio-processing, functional materials, low
carbon energy and printable electronics. The world's largest low
density polyethylene plant is under construction by SABIC, an
investment of £200 million;
(b) an extensive biofuels and renewable energy cluster.
The Teesside Power Station is the world's largest Combined Cycle
Gas Turbine combined heat and power plants producing 1875 megawatts
of electricity. In addition, the Biofuels Corporation operates
the world's largest biodiesel plant and Ensus are constructing
the Europe's largest bioethanol plant at Wilton using locally
grown wheat. The plant will be operational in the summer of 2009.
In addition, Sembcorp has developed one of the UK's largest biomass
renewable energy power stations in the country. There is a further
£4 billion of investment programmed in the next 5 years in
energy, biofuels and petrochemicals;
(c) the Redcar Steel Complex, one of the three main
producer sites in the UK has secured long term contracts with
international partners to supply 3.4 million tonnes of slab per
year for export. In January 2009 it was announced that ownership
of the plant will transfer to a consortium of Corus, Marcegaglia
(Italy) and Dongkuk (South Korea), which will secure the long
term future of the complex. However recently the long term contracts
have been terminated and the future of the complex is in doubt;
(d) Teesport, the third largest port in the United
Kingdom, handles 10% of all UK traffic. Oil and gas based chemicals,
iron ore import, coal imports and steel exports account for 75%
of its trade. Planning permission has been granted for a major
deep sea container terminal of national importance. Walmart have
opened and Tesco will open a major import centre employing 800
people;
(e) a strong biotechnology sector based on Avecia and
Johnson Matthey; and
(f) a world class engineering design and plant maintenance
industry employing over 5000 people including companies like Cleveland
Bridge, AMEC, Aker Solutions, Whessoe, Heerema, Corus Tube and
K Home Engineering.
2.2 The Tees Valley economy makes a major contribution to
the regional and national economy. It contains world class petrochemical,
biofuel energy and steel plants and a major European port. If
the national economy is to grow and prosper and retain its manufacturing
base, the growth of the Tees Valley economy can make a major contribution.
For example:
(a) the petrochemical sector provides the raw materials for
much of British industry. The sector produces the goods which
make new windows, carpets and flooring and manufactures the polymers,
paints, glues and lubricants used by the motor industry. A vibrant
petrochemical sector is one of the bedrocks of a thriving manufacturing
industry. Without it the imports bill would rise because the base
chemicals produced by the industry would need to be imported.
£250 million investment by SABIC in the world's largest low
density polyethylene plant shows that considerable new investment
is taking place;
(b) the energy industry and the growth of biofuels is helping
to contribute to the provision of alternative renewable sources
of energy the continuity of supply and the reduction in carbon
dioxide emissions will help enable the Government to meet its
obligation on emissions. There is also enormous ongoing and potential
investment in Hartlepool Nuclear Power Station;
(c) the Northern Gateway container terminal has the potential
to make a major contribution to the national economy. UK Port
demand forecasts expect an annual growth rate of containers through
UK ports of 3% per annum to 2030. The North accounts for a 30%
share of the UK container market but receives only 6% of the direct
deep sea traffic. Most of this traffic will travel through the
congested south of England to the north. A container handled from
Teesport going to a north of England destination produces an average
saving of 116 lorry miles compared to a container at Felixstowe.
Given the 1.05 million TEUs expected through the Northern Gateway
Terminal will induce an annual saving of 72 million lorry miles
by 2020 and a reduction of 10-15% in unit costs per TEU for northern
business using a direct deep sea call at Teesport and an overland
rail leg, rather than doing the equivalent from Felixstowe; and
(d) the element of the advanced engineering sector which specialises
in long term plant design and maintenance is one of the few sectors
not affected by the credit crunch. For example, one of the major
companies in the sector K Home Engineering is recruiting 100 engineers
to meet its overseas contracts.
3. THE POTENTIAL
FOR THE
GROWTH OF
MANUFACTURING AND
REWEWABLES IN
THE TEES
VALLEY
3.1 Within the Tees Valley there is a pipeline of major investment
in energy. The following projects are in the pipeline:
| (a) | Thor Cogeneration Ltd obtained approval from the Government to construct a 1000 MW gas fired combined heat and power station at Seal Sands. This £500 million project due to supply power to the National Grid in 2010 will require 20% less gas than an existing gas-fired plant and produce 60% less carbon emissions than current coal-fired plants. The surplus heat/steam will be used to meet the needs of local industry thereby reducing their energy costs;
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| (b) | the £500 million upgrade of Teesside Power Station will result in a 40% reduction of nitrogen oxides emissions, improved efficiency, reduced carbon emissions and a 25 year life extension. The upgrade is programmed for later this year;
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| (c) | Sonhoe Development Company proposes to construct a new heavy oil upgrader at Wilton at a cost of £2 billion. The heavy oil upgrader will produce 200,000 barrels per day of heavy crude oil, half of which will be supplied from the North Sea. The plant will produce diesel (for which nationally there is a shortage of refining capacity) and naptha at a price which is competitive with the Middle East. It will therefore improve the competitiveness of the petrochemical industry in the Tees Valley for whom naptha is the main feedstock. The upgrader/refinery will be carbon capture ready which means that carbon dioxide produced at the site can be stored and then piped back for storage under the North Sea. The plant is due to be operational in 2014;
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| (d) | Progressive Energy/Centrica proposes to spend £2 billion on constructing a clean coal gas fired 800MW power station at Teesside with carbon capture and storage under the North Sea. An application is to be submitted to the European Union to be of 12 pilot demonstrator projects with a view to providing a carbon dioxide pipeline system to store the gas under the North Sea;
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| (e) | MGT have announced their plans to develop a 300MW renewable energy plant at Teesport, Redcar. The plant will be fuelled by 2.4 million tonnes of short rotation forestry wood from a combination of UK and global sources, utilising the port for logistics. This investment of over £400 million will generate 150 jobs on site and aims to be operational by 2012;
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| (f) | Graphite Resources are the private sector developer and anchor tenant for the South Tees Eco Park, Redcar. Using Steam Autoclaving technology Graphite Resources can handle with cycle each of the process up to 30 tonnes of Municipal Solid Waste. The end product "Cellmat" can be used as feedstock for second generation bio-fuels or used in bio-mass power stations;
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| (g) | SITA have operated an energy-from-waste plant in Billingham since 1998. The current facility operates two "waste lines" handling 250,000 tonnes of waste per annum and generating 20MW of electricity. A third "waste line" is under construction capable of handling a further 125,000 tonnes of waste and increasing power generation capacity to 30MW; and
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| (h) | Able UK has developed a growing decommissioning and recycling of ships/oil platforms business. £40 million has been invested to provide the world's largest dry dock facility and over 300 metres of new deep water quays at Seaton Port.
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3.2 In addition to the key investments above, the Tees Valley
has been diversifying its economy. The University of Teesside
is in the top 20 of universities in the world recognised for its
work in digital media. The University with support from One NorthEast
has set up an Institute of Digital Innovation, innovation and
start up premises for businesses. It has also set up 32 Fellowships
to enable postgraduates to develop a business idea or further
research. The Institute is complemented by the Boho which will
provide purpose built accommodation for businesses in the digital/creative
cluster, artist's studios and homework units. By 2010, 27 businesses
and 300 jobs will be created in the Boho Zone. It is also intended
to develop satellite facilities in the rest of the Tees Valley.
3.3 Other examples of diversification and the development
of logistics in Darlington and along the A19, and the key business
park developments at Wynyard and the Skylink International Business
Park at the airport. The major regeneration sites will provide
much needed accommodation for the development of business services
in the Tees Valley. Finally, it is important that the area develops
a larger critical mass of businesses in the Tees Valley. The development
of the regeneration sites will help to do this coupled with a
major programme of enterprise centres which will provide much
needed accommodation for small businesses.
3.4 The world class nature of the industries present in the
Tees Valley shows that the area has tremendous potential to contribute
to the development of the national and regional economy. These
developments are vital in ensuring the UK provides the base petrochemicals
on which manufacturing industry in the UK depends. The proposals
for the biofuels and energy plants will contribute substantially
to helping to ensure security of supply for energy nationally
and to targets agreed by Government to reduce CO2 emissions, whilst
at the same time helping to improve the competiveness of the Tees
Valley by reducing energy costs.
3.5 The Northern Gateway proposal will improve the competitiveness
of the North of England as a whole by reducing the cost of transport
of goods by road through the UK from southern ports, and reducing
congestion and CO2 emissions in the South East of England.
4. THE ROLE
OF GOVERNMENT
AND ONE
NORTHEAST
IN SUPPORTING
THE MANUFACTURING/RENEWABLE
ENERGY INDUSTRY
IN THE
TEES VALLEY
4.1 Lord Mandelson has developed the concept of Industrial
Activism to guide Government policy towards manufacturing industry.
Essentially this is a strategic approach in looking how government
can support manufacturing industry in a global economy. This is
best done through encouraging innovation, developing the skills
needs of the industry, and shaping globally the institutions that
manage globalisation. Clearly this approach is very sensible.
4.2 Part of the approach is to concentrate on sectors where
the UK can specialise and add value—in this regard the Government
targets banking and financial services, new technological and
manufacturing processes particularly in the low carbon economy
and biosciences. Clearly the Tees Valley has a considerable advantage
in the low carbon economy, renewable energy and biotechnology
(Avecia and Johnson Matthey). The worry we have is the Government's
attitude to traditional industries which are still the bedrock
of the manufacturing economy, particularly chemicals and steel,
although on the latter through the Corus Task Force the Government
has been very supportive.
4.3 The chemicals industry is the UK's second largest manufacturing
exporter adding over £10 billion to the country's GDP and
with a trade surplus of £400 million in 2007. Wilton began
as an integrated chemical plant carrying out a whole series of
processes. Now Wilton is owned by seven different businesses all
foreign-owned. Whereas under ICI losses in one plant would be
affected by profits in others upstream or downstream in the value
chain, a loss making plant is likely to be closed by a foreign
multi-national on the basis of the considerations of the company
not the UK economy or its importance to other customers at Wilton.
The biggest challenge Government and the industry face at the
current time is how to ensure the complex can be maintained and
grow in a complex multi national ownership and a global economy
where decisions on the future of the complex are taken outside
the UK. The Government needs to take a strategic approach to its
future development working with the companies backed by action
and resources focussed on value added and not just jobs created.
The concept of industrial activism applies just as much to chemicals
as the newer industries.
4.4 ONE are supporting the process industry/and the renewable
energy industry in the following ways:
(a) financial support for the Centre of Process Innovation
at Wilton. Founded by ONE at Wilton it has received £62 million
in grants to date and contains two national centres—the
National Industrial Biotechnology Facility based at Wilton which
creates chemical and pharmaceutical products using biological
enzymes and PETEC, the Printable Electronics Technology Centre
based at Netpark, Sedgefield. In addition it carries out work
on advanced processes, low carbon energy, the development of functional
materials and printable electronics. The core function of CPI
is to bring together industry and academia to translate scientific
research into commercial products. A recent OECD study on innovation
carried out for the Northern Way was very impressed with the outputs
of CPI;
(b) working through NEPIC and Tees Valley Regeneration help
attract new investment to the Tees Valley;
(c) through the North Tees/South Tees Development Framework
in partnership with the local authorities, JSU, NEPIC, CPI and
TVR to identify the barriers to development and the infrastructure
constraints on future investment that needs to be tackled eg capacity
constraints on national grid power lines; land ownership; Environment
Agency policies on flooding;
(d) through the Wilton Innovation Connector proposal provide
incubator units for new businesses developed by CPI to manufacture
new products and develop an integrated National Academy for the
engineering and process industries;
(e) actively support new businesses for grant aid;
(f) Government have recently helped to encourage the Progressive
Energy project by announcing £90 million in the budget to
support pre-combustion and plant combustion carbon capture storage.
ONE is funding a feasibility study to develop a business case
for a CO2 pipeline Carbon Capture Storage Network in the North
East.
4.5 With regard to high level skills, much still needs to
be done. Tees Valley Unlimited will be working with the process
and renewable energy industries, sector skills councils and the
universities to develop a clear understanding of the demand for
skills in these sectors.
5. CONCLUSION
5.1 We hope that the Committee finds the above overview helpful.
The Director of the JSU will be happy to attend the Committee's
hearings to answer questions on the evidence.
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