BFBEnergyPaper

3.1The impact of high energy costs on Britishbusiness“Our business is increasingly concerned about rising energy costs, as I’m suremost manufacturing businesses must be.”- Owner of a large manufacturing business based in the West MidlandsIn addition to placing a hefty administrative cost on British business, it is also clear that theincrease in energy prices is having a detrimental effect on manufacturing businesses, inparticular EIIs who depend on cheap energy. While there is no definitive definition of suchan industry, we are able to reach one by combining the UK’s definition with the EU’s. 53 Thisprovides us with the following industries which this paper will investigate:■ Metals (Section 3.1.1)■ Chemicals and chemical products (Section 3.1.2)■ Paper and paper products (Section 3.1.3)■ Mineral extraction (Section 3.1.4)■ Glass products (Section 3.1.5)■ Ceramics and cement (Section 3.1.6)This is not meant to be a definitive list of all EIIs within the UK; however it does include all ofthe industries which are considered to be energy intensive by the European Commission. Itis also not an argument that these firms are ‘special cases’, instead it is simply an analysis oftheir concerns.EIIs have long invested in energy efficiency, motivated both by the need to reduce costs and tocombat climate change. This dependency on energy means that the recent increase in priceshas had a devastating effect on EIIs. Production levels in these firms have been in decline inboth the UK and the EU. The impact is not limited to just EIIs: the share of manufacturingin the UK’s GDP fell from 19 per cent in 1997 to 10 per cent today. 54 Manufacturers have nodoubt that high energy costs are one of the main reasons for this decline:“The high cost of energy in Europe… has become one of the biggest threats tothe competitiveness of European industry. When compared with other regionsof the world, industrial energy costs in Europe are substantially higher.”- Accenture 55The impact of high energy costs on Europe’s EIIs looks set to only grow over the comingyears: the International Energy Agency recently warned that the EU is set to lose 10 per centof the global market in energy intensive exports. A short analysis of the energy intensivesectors shows the devastating impact that high energy bills are having on the EIIs. Thischapter looks at each industry individually and calculates the number of jobs that could belost as a result of expensive energy.Energy Policyand the EU53 The EU’s definition is provided at 54 World Bank, data found at 55 Accenture, Unlocking industrial opportunities, p.22, found at 24