North West manufacturing under threat thanks to Ofgem charge

The North West of England has long been the lifeblood of the UK’s heavy industries and its manufacturing sector, but despite its recent resurgence, with 15,000 manufacturing jobs created since 2010, the region now faces a new potential blow from the energy regulator Ofgem.

Ofgem, the UK’s electricity and gas regulator, is concerned that with increasing numbers of both domestic and industrial users at least partly off-grid, there is a looming shortfall in the costs for running the network.

It is seeking to address this through its Targeting Charging Review, which recently closed the consultation period with industry.

Most users have responded positively to this principle, recognising that everyone should pay something towards the network’s fixed costs, but they have been keen to ensure that this does not discourage investment and that costs are proportionate to use.

Ofgem are proposing a new fixed charge by user category, and on current information, this model will increase price differences by region meaning the North West’s charge are 26 times that of the lowest charged regions.

This would mean several millions of pounds in extra fees for manufacturers across the North West and would be a significant blow for the region, where manufacturing industry employs over 340,000 people and contributes £26 billion to the UK economy.

At a time of increased economic uncertainty, energy intensive industries in the UK already face high costs versus other EU competitors, and industries based in the North West will be hit with a double-disadvantage with increased costs.

Olf Lofgren, Managing Director of Iggesund Paperboard’s paperboard mill in Cumbria, said: “This is truly outrageous. We need stable and predictable conditions, and when Ofgem suggests a charging model which includes geographical discrimination within the UK, we are baffled.”

“What has the North West done wrong to deserve this? The competiveness of the manufacturing industry in the North West is being undermined by a state agency that hasn’t considered the impact it is having on communities.”