The impact of spiraling energy costs to the UK’s mineral products industry has prompted manufacturers to write to Chancellor Nadhim Zahawi today.
The Mineral Products Association (MPA) has called on the Chancellor to take urgent action to tackle the rising energy costs threatening a £16 billion foundation sector that every year produces 400 million tonnes of essential materials for UK construction and manufacturing.
Four steps the Treasury could take to alleviate the increasing burden on the UK mineral products companies have been identified by the MPA:
• Allow temporary deferral of VAT payments
• Reinstate or replace the red diesel rebate to cut fuel duty
• Extend the freeze on Aggregates Levy indexation beyond April 2023
• Take measures to tackle costs for Energy Intensive Industries (eg cement and lime)
The essentiality of the mineral products sector was formally recognised by the Business Secretary during the first wave of the Covid pandemic, and at the time, VAT deferrals were key to helping MPA members to manage cashflow and keep their businesses running.
Fuel is one of the major drivers of cost, and the removal of the red diesel rebate in April 2022 added a punitive £100 million to the mineral products industry as well as driving up the costs facing the wider construction sector, which must also pay the increased fuel duty.
The MPA acknowledges the current freeze on the Aggregates Levy, and the letter asks for an extension to the current £2 per tonne of aggregate sold. It also recognises the ongoing consultation on potential measures to address costs for Energy Intensive Industries (EIIs) and calls for proposals to be turned into actions.
Robert McIlveen, MPA Director of Public Affairs, said: “Our members are seeing very significant, rapid price increases in their fuel and energy costs, putting huge pressure on them and their onward supply chains. Given the essential nature of the industry’s products and their fundamental role in the UK economy, it is vital for the Chancellor to address the pressures the sector is facing.
“Earlier this year, the former Chancellor removed our industry’s right to use red diesel. While in the long term, we are committed to transitioning to non-diesel equipment, there are no immediate alternatives, so not only are we facing additional cost, but removal of the rebate has turned out to be very badly timed. Action on fuel duty and VAT deferrals would be extremely helpful, as would longer-term certainty on the Aggregates Levy. Progressing the support for Energy Intensive Industries that is already under consideration by the Government is also vital.”
