State of the Region: Call for action on energy amid jobs fears

NORTH West manufacturers’ ability to remain globally competitive is at risk as a result of high European energy prices as the US benefits from the shale gas revolution, a business leader has warned.

Energy was rated a major area of concern by business leaders who gathered to discuss prospects for the North West and the findings of TheBusinessDesk.com’s State of the Region survey.

Dr Martin Ashcroft, managing director of Tata Chemicals Europe – the Indian-owned business based in Cheshire – says investment and therefore jobs – are being sucked away from Europe to North America as a result of high energy costs and lack of clarity on policy.

He said Tate Chemicals’ site closure, which is costing more than 200 jobs at Winnington near Northwich, had been driven by high energy prices.

He said: “While our orders and volumes have been picking up our sector and process industries in general, face a threat from the US because of cheap gas there. It is a very, very significant problem.”

Referring to the cutbacks at Tata Chemicals as a “very sad state of affairs” he added: “Europe needs to get its act together quickly on this issue it it wants to have industry here.”

Dr Ashcroft cited German chemicals group BASF as a prime example of an international manufacturer switching resource from Europe to the US. Last year out of its capital investment budget of €1bn, €930m is being spent in the US and €70m in Europe,

“This is of great concern, because in our industry, the decisions made today will determine what will happen in five to 10 years’ time.

“When energy is something like  40-50% of your cost base, it’s not just a nuisance, it’s a fundamental business changer, it can’t be underestimated,” he added.
 
Damian Waters, regional director of business organisation CBI in the North West said: “The North West gas a real opportunity through nuclear, fracking and tidal power to really lead the UK in terms of becoming self sustaining from an energy perspective.

“The concern we have though is that we need courageous leadership regionally and nationally to push those opportunities forward. As we get closer to a general election the likelihood of these difficult decisions being taken  

Ian Wood, projects partner at law firm DLA Piper, which sponsored the State of the Region survey said: “The recent ability to extract US shale gas reserves has had a significant impact on the supply and distribution of gas around the world. With recent government policy giving the green light to start shale gas extraction in the UK, then we might expect some positive consequences here.  

“However, whilst unconventional gas extraction has been heralded by some leading commentators as ‘the next big thing’ for the UK, with potentially significant deposits in the north west of England, we are still in the early stages of exploitation of the UK’s unconventional gas reserves. Progress has been slow and uncertain due to cost, commercial viability, the permitting process and public response.”

Mr Wood said that while the debate rages about shale gas and fracking, coal bed methane offers some opportunities.

“The North West already has CBM wells sunk and exploratory development underway, with a handful of commercial operators close to achieving commercial-scale drilling with the help of directional drilling techniques, adopted from the oil industry. It may be that CBM presents the more immediate prospect for the North West’s jobs and industries.”