Britain’s chemical industry is dying, says Jim Ratcliffe

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Britain’s chemical industry is on the brink of extinction due to a combination of high energy prices and carbon taxes, according to Sir Jim Ratcliffe, the billionaire owner of petrochemicals group Ineos.

The company, which owns several petrochemical plants at Grangemouth in Scotland and owns an associated refinery, shut down ethanol production at the site last week.

The 80 directly affected workers have been redeployed to the remaining chemical operations in Grangemouth, although Ineos said around 500 indirect roles would be affected in the wider economy.

The group said in March last year that it would halt ethanol production due to falling demand in Europe and increasing pressure from imports.

This process, one of only two in Europe, produced synthetic ethanol, which is used to make pharmaceuticals and other important medical applications.

Ratcliffe said: “We’re seeing the end of one of our biggest industries as chemical production has gone.

He added that removing British industry, “does nothing for the environment. It just shifts production and emissions elsewhere.”

Ineos It said the ethanol plant has been loss-making for several years, mainly due to high energy prices in the UK, which it said have doubled in the past five years and are five times higher than of the US.

“The costs in particular that have hurt us have been energy because it’s an energy-intensive process and the resource is natural gas,” said Stuart Collings, managing director of Ineos Olefins and Polymers UK.

At the same time, high carbon costs and low price pressure from countries like Pakistan had added to the problems.

“We’ve seen the market go down, prices go down, costs go up and we’ve gotten to the point where it doesn’t make sense (to continue operating),” said Collings.

The warning comes after Britain’s Chemical Industries Association (CIA), the industry’s trade body, warned late last year that future investments were at risk as companies grappled with rising costs and falling demand.

It said industrial production has fallen by more than 37 percent since January 2021, citing official figures. Steve Elliott, the director general of the CIA, said that the sharp fall is mainly due to “energy costs and costs associated with carbon instability”.

Although UK manufacturers have been complaining about paying higher energy costs than their European peers, the continent’s industry is facing similar challenges. More than 11mn tons of energy they have already been announced to be closed between 2023 and 2024, according to Cefic, the European industry trade association.

The sector was seeing “closure announcements across Europe,” said Ineos’s Collings. “What we are telling the government is ‘wake up’.”

Ineos says it wants to see action in the UK on energy policy and trade policy, as well as carbon pricing. The new energy policy should provide “globally competitive prices for natural gas”. The current emissions trading scheme, where big polluters can sell “allowances” that allow them to emit a certain amount of carbon dioxide, acts as a tax on UK and foreign workers who pay nothing , it said.

Manufacturers are also waiting for the government’s new industrial policy. The CIA’s Elliott said that while business cooperation “has been good, there is nothing that gives the powerful industries hope that we will be seen as part of the solution”.