Despite government attempts to reduce high electricity prices as part of its industrial strategy unveiled on Monday, production in the º£½ÇÊÓƵ's cement sector is rapidly dwindling, according to industry leaders.
Keir Starmer, the Prime Minister, has proposed plans to cut energy bills by 25 per cent from 2027 following alterations to energy markets and carbon taxes, appealing to thousands of manufacturers nationwide, as reported by .
Currently, º£½ÇÊÓƵ firms are paying four times more for electricity than their American counterparts.
Leaders in the essential cement sector, crucial for the construction of more homes and key infrastructure, have cautioned that construction companies could become increasingly reliant on imports as manufacturing continues to fall.
Preliminary estimates suggest that output could reach an all-time low in 2024, with high energy costs affecting 10 º£½ÇÊÓƵ cement producers.
Despite its new industrial strategy, the government has yet to offer solid plans to support the critical minerals industry. A policy paper on minerals is anticipated to be published within the coming months.
Diana Casey, executive director of the Minerals Products Association, stated that the new project opportunities outlined in the infrastructure strategy published last week have given cement manufacturers a glimmer of hope for increased demand.
Casey has issued a warning that domestic production could be overtaken by imports from EU countries and northern Africa due to high electricity prices in the º£½ÇÊÓƵ. He revealed that firms have reported paying up to a third more for energy in Britain than elsewhere.
Data compiled by the Institute for Energy Research indicates that industrial electricity prices are approximately 50 per cent higher in the º£½ÇÊÓƵ compared to France and Germany, and four times as costly as in the US.
Speaking to City AM, Casey said: "I guess [the government] can choose to kind of invest in a domestic industry that has jobs across every region of the º£½ÇÊÓƵ, and highly paid jobs as well, or they can choose to import and that kind of opens them up to the risk of kind of security of supply issues,".
He added: "The º£½ÇÊÓƵ is also quite committed to decarbonising, and if you've got your production here domestically, you have some control over how that decarbonisation happens."
Over the past decade, cement imports have nearly doubled, with the total share of imports now exceeding 30 per cent, compared to just 12 per cent in the 2000s.
Casey further noted that the competitiveness of º£½ÇÊÓƵ cement makers had "eroded" because foreign businesses were not subject to carbon taxes as part of emissions trading schemes, unlike British companies.
This has made overseas cement factories more appealing, especially when considering lower labour costs, according to Casey.
Industrial strategy's importance to º£½ÇÊÓƵ manufacturers
The industrial strategy has outlined plans to implement a carbon border adjustment mechanism, ensuring that foreign products face a "comparable carbon price" to those produced domestically.
The additional costs associated with achieving net zero, such as increased network levies and the unreliability of intermittent renewable energy, have only added to the pressure on cement manufacturers. This inconsistency allows overseas companies to "undercut" º£½ÇÊÓƵ producers.
"The government is going to need cement and concrete, and we want them to really maximise the benefit of the growth they're trying to generate by procuring domestic cement," stated Casey.
Ben Fletcher, COO of manufacturing industry body Make º£½ÇÊÓƵ, highlighted the importance of an upcoming consultation on thresholds that will allow electricity-intensive manufacturers to claim subsidies and pay less on energy. This could be crucial in rescuing the º£½ÇÊÓƵ's struggling producers.
"We will be pushing hard on ensuring that all of the manufacturing sector receives this support and the government moves at pace on the consultation and importantly the implementation," Fletcher commented.
However, the industrial strategy was largely overshadowed by an escalation of a conflict in the Middle East after US intervention over the weekend.
Manufacturers could face further increases in energy bills as oil prices may surge to $110 a barrel if flows through the Strait of Hormuz halved, Goldman Sachs has warned.
A survey by global consultancy Inverto revealed that 84 per cent of manufacturers were revising supply chains to avoid additional costs.
Vicky Parker, an energy and resources consultant at PwC, stated that government officials would be closely monitoring developments in oil prices and their potential impact on the º£½ÇÊÓƵ's industrial strategy.
"If prices were to spike considerably, this would raise questions over the overall policy affordability and reignite the ongoing debate as to how to ensure the º£½ÇÊÓƵ manages its exposure to ongoing volatility in energy costs," Parker said.
