Ritika Janiya
Ed Miliband’s new plans for electricity pricing risk turning out to be a hammer blow to British manufacturing. They could force factories to shut. The proposals the party has come up with would charge different electricity prices in the country, depending on geographical location. As industry experts said, it could lead to something like a “postcode lottery,” whereby some factories would have to stop working due to added expenses, not being able to sustain themselves. Many of those are calling upon Miliband to scrub this plan and save British jobs and industries.
— PSA: This post has been edited. Ed Miliband, one of the more prominent members of the British political scene, is facing fierce criticism after his latest proposal regarding electricity prices in the United Kingdom. The new deal would supposedly be carried out as a means to satisfy the country’s “net zero” carbon emissions requirement. However, many professionals have given a large variety of warnings about the amount of distress this could cause for British factories and might even compel them to close down. It would imply electricity pricing at differential rates across the country, with some paying more and some less, depending on the area.
A Postcode Lottery for Factories?
The big fear is that this new pricing system might result in a sort of “postcode lottery” for factories. In other words, depending on which part of this country a factory happens to be in, it may well end up paying a much higher price for its electricity than another, because of where it happens to be located. This would be quite a shift away from business as usual under the current system, in which electricity prices are uniform throughout the UK.
Under the new proposals, electricity prices would be higher in southern England but lower elsewhere, like Scotland, where there are many wind and solar farms. This would be by offering lower prices in the areas that are near sources of renewable energy, which would encourage the use of clean energy and reduce the need to construct new power lines.
Industry Concerns
The concept may sound good on paper, but many industry groups are sounding the alarm about the potential impact. One of the loudest voices against the plan is Make UK, a group representing manufacturers across the country. They argue that this new pricing system could be what finally sees some factories shutting down because they simply would not be able to afford higher electricity costs.
In response to the consultation by the government on the proposals, Make UK said that “Steel or other energy-intensive industries would have no realistic option to relocate their very heavy assets to more favorable pricing zones and would instead be forced to shut down.”.
That is to say, if there is a factory in one region where the prices of electricity are expected to increase, this factory can’t simply move out elsewhere to where prices are more reasonable. Any move by a large factory involves great expense and complicated logistics. Thus, in such a situation, no alternative other than shutting down the factories may present itself, thereby costing jobs and consequently hitting hard the local economy.
A Risk of Factories Leaving the UK
The concerns don’t stop there. Some experts in the industry are warning that if these proposals go ahead, it could push factories to move out of the UK altogether. If a factory has to move anyway, it might start looking at other countries where the costs of doing business are lower.
UK Steel – the body that represents the likes of Tata Steel and British Steel, whose main production sites are in the south of the country – is very concerned. Frank Aaskov, who manages Energy and Climate Change Policy for UK Steel, went as far as to describe the proposals as “absurd”. He said: “Making electricity more expensive for the steel sector would be disastrous.”.
“The new Government clearly backs steel. But zonal pricing is an extreme reform of the electricity market, creating winners and losers through a postcode lottery. The new Government inherited this policy idea, but it now has the opportunity to bin it, ensuring the steel industry can invest,” Aaskov said.
Calls for a Rethink
With so many warnings and concerns, there comes growing pressure on Ed Miliband and the Government to think again about these proposals. Many urge them to find a way of backing the net zero ambitions without risking British factories. In particular, the steel industry called for a more balanced approach that would not unfairly penalize certain regions of the country.
One fears that if these proposals go ahead as are, some thousands of jobs might be in jeopardy. And not only that, this could damage local economies and generally reduce the competitive edge of the UK on the world stage. The debate rages on, with many in great suspense over whether the government is listening to concerns and will revise these changes before it is too late.
Ed Miliband’s power price plans will risk British factories in pursuit of net zero. Indeed, some factories could be forced to close if they cannot afford higher electricity costs under the “zonal” pricing system he has proposed. Industry groups, including Make UK and UK Steel, are urging the government to rethink the plans and find another solution effective for both the environment and the economy. The future of British manufacturing may depend on it.
