BPF write letter to John Hutton MP

Dear Secretary of State

Thank you very much for your message earlier in the year congratulating the British Plastics Federation on its 75th Anniversary as the World’s first Plastics Association.  Our member companies were very pleased to hear of your appreciation for our record on innovation and export and also the strong relationship that exists between us and your officials.

The British Plastics Federation Council, composed of leading business people met last week to consider changing economic conditions and the effect on our industry.  We wanted to make you aware of our findings and offer some proposals.

Business Outlook
On a small survey sample about 54% of companies expect UK sales turnover to increase by an average of 5% over the next 6-12 months whereas 36% expect a decrease on business of 5-10%.

63% expected to reduce their workforce by an average of 4%.  27% expected their workforce to remain the same.

Exporting is strong thanks to weak sterling.  As you can see the above picture is mixed.

Housing
The market for construction products for housing is very hard hit with new housing starts plunging to the lowest level since 1945.  This greatly affects demand for plastic pipes, insulation material, PVCu doors, window frames and conservatories and floor coverings.  In the medium term there is a strong need for more housing but the Government’s targets for new build will not be achieved without measures to improve liquidity.

We would propose the Government:

• Provide help for first time buyers to secure mortgages and lower stamp duty for them
• Increase support for social ownership housing schemes
• Remain committed to your Capital Investment Programme

Fuel Duty and V.E.D.
New car sales have plunged by 8% due to high fuel costs, the threat of V.E.D. increases and uncertainty. This affects our suppliers to the automotive industry, who, in lightening vehicles with plastics save fuel and contribute to the low carbon economy.

We have the highest fuel prices in Western Europe thanks to taxes and are pleased the Autumn Duty increase has been postponed.

• We believe it should be scrapped permanently
• We urge the Government not to bring in the substantial increase in Vehicle Excise Duty, which it admits will adversely affect 43% of drivers.

Energy Costs and Security of Supply
Plastics companies coming off two or three year deals are getting huge cost increases in the range of:

• Gas  + 50-100%
• Electricity +15-99%

UK Gas prices are 16% higher than those in Continental Europe and UK Electricity prices are about 38% higher than Germany on a year ahead basis.

This, if it continues, will have consequences for UK inward investment and business re-location.

The Plastics Industry is not energy intensive and we have struggled for years in competition with other materials that only pay 20% of the Climate Change Levy and overseas competitors, e.g. France, who do not have an industrial energy tax.  For the 80% of our industry who fulfil DEFRA criteria, we are urgently awaiting EC State Aids approval for a Climate Change Agreement.  Your BERR officials and those of DEFRA are doing their best to expedite matters.

We have real concerns over the UK’s security of energy supply. At the time of writing 50% of our ageing nuclear capacity is offline and there has been only one cargo delivered to the two LNG Terminals. We can only store 5% of our natural gas needs whereas France and Germany can each store 20%.

We would propose:

• Government must speed up planning permission and attract investment for: modernised nuclear capacity; natural gas storage and wind farms
• The Government must provide leadership in explaining the benefits of Energy from Waste in taking our unrecyclable waste, generating home grown power and avoid landfilling.

Energy from Waste provides all electricity and heat for 16% of the population of Denmark.

Again the Government needs to speed up planning permission and attract investment for Energy from Waste facilities.

Oil of course provides the raw material for the plastics industry and our member companies are hard hit by price increases of around 45% in a year.

Support for Export
Twenty five percent of plastic products are exported but the UK Trade Balance in Goods for 2007 was a poor - £89.5bn.

We are urging our member companies to look seriously at Export opportunities. The weakness of sterling helps and with UKTI assistance we are taking companies to these key exhibitions in growth markets:

• Plast Eurasia  Turkey   November 2008
• Plast India  New Delhi  February 2009
• Plastpol  Poland   May 2009
• Chinaplas  Guangzhou  May 2007

I attach media coverage of the last two Exhibitions we took companies to.

We would propose that:

• UKTI increase the grants available to companies to export
• Government should talk up much more the importance of Exporting to the economy.  Too much attention is given to inward investment.
• Government should examine whether or not the RDA trade development empires are delivering real value.

In conclusion we submit these positive proposals and would be happy to discuss them with you and your officials.

Yours Sincerely

Peter Davis
Director General

Enc – Coverage of Chinaplas and Plastpol