The head of Britain’s largest packaging company has launched a stinging attack on UK government policies that have resulted in significantly higher energy costs than the rest of Europe.
Miles Roberts, chief executive of DS Smith, said that at a time of huge growth in online shopping the UK’s paper industry had shrunk significantly over the past decade while Germany’s sector had doubled in size because power costs were much higher on the island nation compared with the EU.
“The fundamental issue is energy costs for heavy industry users are nearly double the average of Europe,” he told the Financial Times. “It’s quite a disadvantage relative to other countries. Government has put more and more taxes on businesses.”
DS Smith has announced big investments this year to build new production sites in Italy and Poland and expand in Germany.
Germany’s paper industry has grown from three to seven times the size of the UK’s because of Berlin’s policies that help industry with the additional costs associated with decarbonisation, according to Andrew Large, director-general of the Confederation of Paper Industries, a trade group.
Roberts is the latest industrialist to urge the UK government to take action to rein in costs for manufacturers after a global surge in gas prices hit the country particularly badly because of a lack of gas storage and reliance on weather-dependent wind power.
The monthly average UK wholesale cost of electricity reached £200 per MWh in September, almost double the French and German averages of £110 per MWh, according to the Energy Intensive Users Group.
The lobby group is calling for a reduction in network costs, a cost containment mechanism for the surge in gas prices and measures to alleviate some carbon costs. The government has offered loans to help weather the crisis.
Roberts highlighted as problematic the UK’s emissions trading scheme that launched in May and puts a price on carbon emissions, which has risen near to £75 a tonne, a premium to Europe.
Paper is a £12bn industry in the UK, employing 62,000 people. Roberts said if government policy did not become more supportive it faced a further decline and the UK would become more reliant on imports for a product undergoing immense growth in domestic demand.
“We are committed to becoming carbon-neutral. Various governments have been very supportive of that in Germany, France and Spain,” he said, adding that he would ideally like to keep investing in the UK.
“We just have to understand what the UK government policy will be.”
The Department for Business, Energy and Industrial Strategy did not immediately respond to a request for comment.
Not everyone in the packaging industry agrees with Roberts. Tony Smurfit, chief executive of Smurfit Kappa, Europe’s largest paper-based packaging group, told the FT last month that industrial companies should fight their own battles to deal with higher energy costs.
“Where the government needs to step in is to protect poorer people faced with massive energy bills. Industry should look after itself,” he said.
DS Smith, which supplies the UK with 28 per cent of its cardboard boxes, is benefiting from the pandemic-induced surge in ecommerce.
It is managing to keep in check rising fibre, energy and logistics costs through price rises, hedging arrangements and an in-house fleet of drivers.
The FTSE 100 group increased its dividend on Thursday after reporting an 80 per cent year-on-year rise in pre-tax profit to £175m in the six months to the end of October, on revenues up 16 per cent to £3.4bn.
Shares in the group were flat in late-morning trading on Thursday.