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Britain's chemical industry will collapse due to a combination of high energy prices and carbon taxes, according to Sir Jim Ratcliffe, the billionaire owner of petrochemicals group Ineos.
The company, which owns several petrochemical plants in Grangemouth in Scotland and owns an associated refinery, shut down ethanol production at the site last week.
80 directly affected workers have also been made redundant at existing chemical works in Grangemouth, although Ineos said more than 500 indirect roles would be affected in the wider economy.
The group said last March it would halt ethanol production due to falling demand in Europe and increasing pressure from foreign countries.
This operation, one of only two in Europe, produced synthetic ethanol, which is used in the manufacture of pharmaceuticals and other important medical procedures.
“We're seeing the bankruptcy of one of our biggest industries as the chemical industry ends its life,” Ratcliffe said.
Eliminating Britain, he added, “doesn't do anything to the environment. It just changes production and emissions elsewhere.”
Ineos he said the ethanol plant has been loss-making for several years, mainly due to high energy prices in the UK, which have doubled in the past five years and are five times higher than in the US.
“The costs that have particularly hurt us are around energy as it is a very energy intensive process and the source is natural gas,” said Stuart Collings, chief executive of Ineos Olefins and Polymers UK.
At the same time, high carbon costs and pressure from countries like Pakistan have added to the challenges.
“We've seen a market downturn, low prices, high costs and we've reached a point where it no longer makes sense (to operate),” Collings said.
The warning comes after Britain's Chemical Industries Association (CIA), the industry's trade body, he warned at the end of last year that future investments were at risk as companies battled rising costs and falling demand.
It said the industry's output has fallen by more than 37 percent since January 2021, citing official figures. Steve Elliott, director general of the CIA, said the fall was due to “energy prices and related costs and uncertainty about carbon”.
Although UK manufacturers have long complained of paying higher energy costs than their European peers, industry on the continent faces similar challenges. More than 11mn tonnes of capacity it has already been announced that it will be closed between 2023 and 2024, according to Cefic, the European trade body.
The sector has been seeing “closure announcements across Europe,” Ineos's Collings said. “What we are saying to the government is 'wake up'.”
Ineos said it wants to see action in the UK on energy policy and trade policy, as well as carbon pricing. The new energy policy should provide “globally competitive natural gas prices”. The current emissions trading scheme, where big polluters can sell “allowances” that allow them to emit a certain amount of carbon dioxide, acts as a tax on UK drivers and favored shippers who pay nothing, it said.
Manufacturers are also waiting for the government's new industrial strategy. The CIA's Elliott said that although negotiations with industry “have been positive, there is still nothing to give the energy industry confidence that it will be considered part of the solution”.