Manufacturers urge George Osborne to cut energy costs for business

Lobby group EEF calls on chancellor to scrap green taxes as part of series of measures which it says will support recovery

Britain's manufacturers have called on the chancellor to cut business energy costs to support the economic recovery.

Energy prices for UK businesses are rising faster than in other countries, squeezing manufacturers' margins and threatening to choke off investment, the EEF manufacturing group said.

The lobby group said increased costs not borne by competitors in other countries could determine whether companies invest in workers or materials and whether they do so in Britain or elsewhere.

The warning from business comes as figures show household finances suffering their biggest squeeze since April after a series of large price rises by energy suppliers.

In its submission before George Osborne's autumn statement next month, EEF urged the chancellor to sweep away planned green taxes in the name of economic growth.

EEF called for support for energy-intensive industries to be extended from the financial year 2015-16 to 2020-21.

It also said the carbon price floor – a tax on fossil fuels used to generate electricity – should be frozen and then reduced and that increases to the carbon price and the climate change levy should be scrapped.

Its chief executive, Terry Scuoler, said: "With government policies on climate change set to add as much as 50% to the electricity prices paid by industry by 2020, it must act now to stop planned rises in energy taxes and set out a long-term commitment to compensate energy intensive industries. Without this, we risk losing out on the investment in new technology and jobs that our economy desperately needs."

Energy costs have risen to the top of the political agenda after the Labour leader, Ed Miliband, pledged to freeze prices and reorganise the market if his party wins the next election. With incomes barely rising and business margins squeezed, rising energy bills threaten to be a drag on spending and investment.

The Markit household finance index for November showed a sharp drop in households' available cash as prices for essential spending rose faster than stagnant wages. The outlook for household budgets also worsened with 42% of those surveyed expecting to be worse off in a year.

Tim Moore, an economist at Markit, said: "November's survey highlights yet another setback for UK household budgets as weak pay trends and energy price rises appeared to overshadow recent positive news about labour market conditions. With pay falling further behind living costs, households saw the fastest fall in their cash available for discretionary spending since April."

The gloomy outlook followed a report by the government's National Audit Office that predicted household energy costs would increase faster than inflation for 17 years.

In its other recommendations to the chancellor, EEF called for a stronger national infrastructure plan with commitments to specific projects and more investment to unclog Britain's most congested roads. It also urged Osborne to boost funding for apprenticeships and to delay any new legislation and regulation until 2015 to give businesses a break from red tape.

EEF said the measures were needed to make further progress "rebalancing" the economy towards exports and making physical goods and away from domestic consumption – a goal Osborne set himself when he pledged to support a "march of the makers".

Recent official figures showed manufacturing output increasing faster than expected though the loss of 1,800 shipbuilding jobs cast a cloud over the news.

Scuoler said: "We are now seeing signs of a stronger recovery and industry is becoming more ambitious on investment and exports. But we are still some way off from securing the balanced and sustained recovery we need to generate lasting improvements in prosperity and living standards."

Article Source : http://www.guardian.co.uk
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