Ineos chemicals plant is saved – but what is the strategy for the rest of heavy industry? | Nils Pratley
“Our commitment is clear: to back British industry, to stand by hardworking families, and to ensure places like Grangemouth can thrive for years to come,” said Keir Starmer as the Ineos ethylene plant on the Firth of Forth was saved for the nation with the help of £120m of public money.Is the commitment clear, though? What, precisely, does the prime minister mean by “places like Grangemouth”? Which heavy industries and plants is the government pledging to shield from the forces of sky-high energy prices and carbon taxes? Is there a strategy here? Or does intervention happen only at the 11th hour when an important plant is threatened with imminent closure and ministers panic about knock-on consequences?The ethylene plant at Grangemouth, we now know, falls within the protected camp.The government is willing to suffer any embarrassment that comes with handing a financial support package to a company controlled by a foreign-based billionaire, Sir Jim Ratcliffe.On the other hand, the oil refinery on the site was allowed to close this year and be switched to an import terminal.Meanwhile, the ethylene plant up the road at Mossmorran – a place quite like Grangemouth, one might think – is due to be shut by its owner, ExxonMobil, in February after talks with ministers came to nothing.
Then again, the government recalled parliament this year to take control of British Steel at Scunthorpe (even if we’re still waiting for a long-term plan on what to do next).If there is a guiding principle to explain when interventions are deemed “compelling” and when not, it is hard to spot.As it happens, the argument for ensuring production of ethylene at Grangemouth continues for another five years is strong.The product is critical for chemical production throughout the UK; the government mentioned its use in medical-grade plastics, advanced manufacturing and the automotive and aerospace industries.Without the Ineos facility, which serves other plants, the UK’s shrunken chemicals industry would be in an even deeper hole.
But, if the ministerial aim is now to arrest deindustrialisation (while still decarbonising), the thinking doesn’t look joined up in at least three important respects.First, why is it taking so long to deliver the promised savings of up to 25% in electricity bills for 7,000 of the businesses most affected by UK industrial energy prices that are among the highest in the world? The much-hyped British industrial competitiveness scheme won’t arrive until April 2027, or more than halfway through the life of this parliament.And what does “up to” mean?Second, the North Sea oil and gas policy pulls in two directions.Everybody understands no new exploration licences will be granted.But, even as the energy department last month allowed more “tieback” licences to try to keep existing sites economically viable for longer, the chancellor maintained until 2030 the energy profits levy, or “windfall tax”, that makes it less likely that investment will happen.
It’s not as if the levy is producing extra revenue for the Treasury: the estimates are downgraded with every update from the Office for Budget Responsibility.Third, the carbon border adjustment mechanism doesn’t look wide enough.This is the ambition from 2027, coordinated with the EU, to address “carbon leakage” by making imports subject to equivalent carbon prices paid by UK manufacturers.But chemicals aren’t included for instance, and the government is merely consulting on whether refineries should be because of their “role in energy security and the UK’s industrial base”.The last Conservative government was even more inclined to make policy on the hoof when faced with crises at individual plants, it should be said.
One can applaud the spirit of the Labour government’s attempt to try to find solutions for “places like Grangemouth”.Most of Europe is in the same position.But it’s still hard to say there is a real strategy at work, despite the claims to having a “modern” version and vision.Deindustrialising events are still happening faster than the government’s policymaking.
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