Sunday, February 12, 2006

Energy Crisis Hits Plastics Industry Hard

The United Kingdom's Plastics industry today laid bare the full
consequences of continuing rises in its energy input costs.

Peter Davis, Chief Executive of the British Plastics Federation, the
industry's top trade body, said that a survey recently carried out
amongst member firm revealed that 44% of companies were not able to pass
on the increased costs to their customers in their selling prices.
"Last October member firms incurred average increases of 58% for gas and
56% for electricity. Many firms were faced with a staggering 100% rise.
Companies will go to the wall if they cannot secure any relief from
this. Meanwhile our competitors in Europe, with unliberalised energy
markets are paying less and are rubbing their hands at our loss of
competitive advantage".

The UK's Plastic Industry, a strategic sector for the UK economy,
supplying all branches of business ranging from automotive and
construction to the retail sectors is a reliable indicator for the
performance of British business as a whole. "This is a £20 billion
turnover sector whose products help customer industries become more
efficient'', said Davis, ''yet recent energy increases with more in the
pipeline are pushing it to the edge of a precipice".

The BPF's survey also reveals a loss of jobs on a large scale directly
attributable to sharp energy cost rises. 48% of respondents to the
survey said that they were being forced into making redundancies by an
average of 6.5% of their workforce. Davis said "This is an industry
largely of small and medium sized firms. Any one company making
redundancies on such a scale will not make headline news but the
cumulative force of the losses is remarkable. We are looking at over
7,000 job losses nationwide in the plastics industry''.

Investment in the future has also been hit hard. The survey revealed
that 54% of companies have scaled down their investment plans by an
average value of 31% as they struggle to pay their energy bills. Davis
commented that investment in the industry had already declined to
historically low levels and that many companies were cutting costs to
the bone just in order to survive.

Not surprisingly some companies are losing faith in the UK and, where
they have some flexibility, are seriously examining re-locating their
manufacturing to elsewhere in Europe or the rest of the world. Some
10.5% of firms were in this category. Davis concluded by saying that
"International groups based in the UK, and which have made the UK
Plastics Industry a world leader, could well chose an offshore location
for new investments. This will take the edge off growth in key sectors
of the business and will further underline the lack of a level playing
field between the UK and the rest of the Europe".

(release dated 9th Feb)

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