Is Britain a prime location for low carbon industries? The government certainly thinks so and, to its credit, has laid the foundations for a low carbon industrial strategy. But according to a substantial piece of research published last week by the manufacturers’ organisation, EEF, there’s quite a way to go before we can give both established and embryonic cleantech industries compelling reasons why they should set up here in the UK.
The report - Under the microscope – is ‘UK plc’ ready for low carbon?’ - examines how the UK rates as a location for low carbon industries, predicted to be worth around £4.5 trillion by 2015. Despite some notable exceptions, such as the Ford Motor Company’s world-class diesel engine development and manufacturing base at Dagenham, the report warns that we are falling behind other countries that are fast-tracking ambitious plans to nurture low carbon innovation and lure the clean technology (cleantech) start-ups.
Even the USA, which, thanks to the entrenched policies of a previous administration gained a reputation for tardiness in these matters, has recently proved decisive, identifying key players in the hybrid vehicle battery development sector and providing them with $2bn worth of grants in just six months. As a nation, we too risk losing a substantial slice of the global £4.5 trillion cleantech cake unless we act quickly to rectify some deeply embedded problems in areas such as corporate taxation, the planning system and skills.
The EEF report suggests a number of actions that government should consider taking to improve the policy framework for low carbon technologies. Among the fifteen recommendations, four relate to skills, including the creation of a genuinely demand-led vocational skills system, and greater engagement of manufacturers with the skills system.
The UK’s core STEM (science, technology, engineering and mathematics) skills levels compare favourably with those of other developed countries, but there are fears of future shortages, as current STEM take-up in schools continues to decline. The report’s authors suggest that government, employers and educators co-operate to inspire young people to study STEM and acquire a more positive attitude towards careers in science or engineering – vital ingredients for the cleantech ‘revolution’.
Taxation drew no less than five report recommendations. And that is not surprising given the perceptions of our arcane and increasingly unfair tax system. In a recent EEF survey 56% of manufacturers competing on the environmental credentials of their products rated the UK tax system as either “quite bad” or “very bad”. The report urges government to use the corporate tax system to encourage rather than discourage the capital investments on which low-carbon industries will depend.
Other recommendations targeted directly at government policy included a plea to focus on a smaller number of industries in which the UK has greatest expertise, and to commit to the long-term support of these industries. The EEF is also concerned that we currently rank below the OECD (Organisation for Economic Co-operation and Development) average in terms of the amount of government funding directed at cleantech research, development and demonstration, and urges greater investment. In turn, manufacturers should take a more proactive role in pursuing the burgeoning variety of support packages now available to cleantech innovators (a subject I touched upon in my newsletter of November 9).
Carbon Capture and Storage (CCS) was singled out as an area in which the UK has the potential to excel, but the CCS Demonstration competition has yet to secure funding, some two years after it was launched. EEF points out that the Canadian province of Alberta’s competition, which was launched late last year, has C$2bn worth of funding in place and the winning proposals have already been identified.
The EEF also believes that the government can lead by example and make greater use of its not inconsiderable public procurement purse to stimulate low-carbon technology ventures. It cites the development of low-carbon space heating systems for public buildings and establishments as case in point, though it concedes that existing policies, such as the Department for Transport’s Low Carbon Vehicle Procurement Programme, are good examples of the creative use of public procurement in the cleantech sector.
EEF recognises the UK’s continuing ability to attract foreign direct investment (FDI) in its industrial infrastructure, but warns we should not rest on our laurels. Recent successes highlighted in its report include the setting up of an R&D centre for Clipper Windpower in the North East to develop the world’s largest offshore wind turbine, and Nissan’s plan to establish a £200m electric car battery manufacturing plant at its Sunderland plant. However, international FDI competition in the cleantech sector is intensifying, says EEF. And while some governments (including the US and China) are putting in place measures to maximise the benefits to local supply chains, EEF is emphatic that FDI policies should not be based on protectionist measures, which might ultimately prove counter-productive.
Planning remains a significant issue and the advice offered by EEF to the government is that it expedites planning reforms by fully implementing the provisions of the 2008 Planning Act early in 2010. Delays implementing the reforms embodied in this legislation could jeopardise the UK’s ability to strengthen its manufacturing base in planning-sensitive industries where domestic orders may potentially be significant.
The 28-page EEF report can be downloaded here but will require registration on the EEF site.
Les Hunt
Editor
PS – as we finalised this newsletter, the Department for Transport announced £30m worth of funding for public access to electric vehicle charging points. Transport secretary Andrew Adonis has invited cities and businesses to co-operate and bid for the money, which he says will fund installation of charging points on streets, in car parks and in commercial, retail and leisure centres. Experience gained from the ‘Plugged-In Places’ project will inform the future development of a national charging infrastructure. LH