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How to help manufacturing in the UK - Ineos

31 October 2013

Fresh from seeing off the unions at the Grangemouth refinery in Scotland, Ineos owner Jim Ratcliffe has personally warned the UK Chancellor to give manufacturers better reasons to invest in Britain. 

News came out at the end of October that he gave a recent presentation to George Osborne that began with a slide saying “the UK frankly has not been a very attractive place to manufacture”.

Ineos owner Jim Ratcliffe
Ineos owner Jim Ratcliffe

According to The Daily Telegraph, Ratcliffe urged the Government to cut the rate of corporation tax for manufacturing companies to 12%, reduce energy prices that are far more expensive than in the UK than for its main competitors, and give employers a national insurance holiday for apprentices on approved schemes.

In the presentation Ratcliffe told the Chancellor that Britain lacked USPs – unique selling points – for manufacturing investment. He said Britain, as an island, was already disadvantaged on transport costs, but to this could be added “energy, pensions, government attitude, unions, infrastructure quality, skills and tax”.

By contrast, the shale gas revolution in America had given the US a big advantage on energy costs, while Germany had “excellent skills” and “a very strong manufacturing base”, and China had a “massive market” and “cheap labour costs”.

Pointing out that Ineos’s Runcorn plant consumes as much energy as the city of Liverpool, Mr Ratcliffe’s presentation showed that electricity prices for big users in Britain were far higher than those of the US Gulf, Nordic countries, Germany and France.

Part of the reason was environmental taxes, with Britain paying more than €6 (£5.12) per megawatt hour (MWh), against less than €1 in Germany and zero in the US Gulf.

The Telegraph also quoted the Ineos chief as saying his company would be willing to take baseload energy from a new nuclear plant if it were structured like the EDF/Exeltium project financing model in France. There, around 30 large electricity users have given €2bn of funding to EDF Energy in return for guaranteed electricity over 24 years at €45 per MWh – way below the £92.50 MWh “strike price” for Britain’s new Hinkley Point C nuclear plant.

And he believes Britain must move quicker to exploit shale gas, as well as concentrate on a more vocationally skilled workforce.

The good news is that despite the negative aspects of this message, he obviously feels the UK still has sufficient potential as a manufacturing base to commit to a further 25 years at Grangemouth, as well as major investment at some of the other sites Ineos owns and operates in the UK. 

But it is important key aspects of his message are heeded by policy makers. Too many world-class manufacturers have transferred production away from the UK in recent years. We should never forget that industrialists such as Ratcliffe have a wide choice where they can invest.

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