EEF – the manufacturers’ organisation monthly news comment

Published:  08 July, 2011

EEF – the manufacturers’ organisation monthly news comment

With the May elections and referendum behind us and the coalition having spent its first year in power, it is time to look at what the government should be doing to create a stronger more balanced economy. The first part of the government’s Growth Review made a promising start on the steps necessary to make the UK a competitive location for manufacturers and backed it with some welcome measures. But these were the first steps and the focus must remain relentlessly on growth for the rest of this parliament.
One area that needs particular attention is the government’s approach to climate change. Industry accepts the need to reduce carbon emissions and that addressing climate change comes with a price tag of which it will have to bear its share of the cost. It also understands the need for targets to help achieve the required level of reductions. However, the government’s current approach is making that price tag higher than it needs to be and, in doing so, threatens to weaken our competitiveness and ability to grow our economy.
There is one issue that stands out immediately – whether pursuing the 2020 renewable target is the best way to cut carbon dioxide emissions. Currently 3% of our energy comes from renewables, with the previous government signing up to an EU target to raise this to 15% by 2020. Renewables will play an increasing role in our low carbon energy mix but the big questions are whether the current target is achievable without inflicting significant costs on our economy and, whether we should have such a target at all. In essence, should the government intervene and decide what our future energy mix will look like?    
The previous government committed the UK to the 2020 renewable energy target without any obvious consideration of the alternatives. The CCC’s report provides the Coalition with the perfect opportunity for a thorough investigation of whether this is the right way to go. It is vital that it grasps this opportunity as part of a wider review of whether its approach to climate change complements or compromises its growth strategy. With energy prices likely to remain high for some time, competitive energy prices are important to a range of manufacturers, not just those in energy-intensive industries like steel. Failure to address this issue risks undermining much of the good work done in March’s Budget.

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