Economic growth 'dependent on manufacturing'

---

The director general of the Confederation of Paper Industries, David Workman, calls on the government to adopt a "proactive policy for manufacturing."

What impact has the recession had on the paper industry?

It was pretty disastrous during 2008 and 2009. There was a recovery in 2010, particularly in Europe; overall production rose about eight per cent in 2010. It looks as though there is a bit of a bounceback in the UK – we had a very slight increase in production last year, although nothing on the scale of the Europeans.

If you look at production in the UK in 2006 it was about 5.6 million tonnes, then it fell to about 4.3 million tonnes in 2009. This does seem to have levelled off now, fortunately.

The good news is that we have two brand new mills. One is already in operation in Kings Lynn and is being run by a German company called Palm Paper. There is also a Spanish company called SAICA which is due to finish building another mill in the Manchester area this year.

We should see a production increase, providing we don't lose any of the existing mills that we have.

How is the paper industry seeking to combat the increasing use of online communications and attempts to cut back on paper usage in offices?

We have been hearing about the demise of paper for decades now and it simply hasn't happened. We do recognise that certainly in the newsprint and publishing area the internet is taking over a lot of the business. We are undoubtedly going to have to coexist with new technology, but if you look at what paper is made into, newsprint is only one facet of that.

Packaging is by far and away the biggest area. That sector is doing really well and normally corresponds with the state of the economy. If we see some growth coming through over the next two or three years, then there should continue to be growth in that area. In the tissue and hygiene product area, we are again seeing increases in demand; even in newsprint the market is not decreasing. Perhaps increased demand in free newspapers can explain this.

There will also be an increase in demand for paper in the advertising and promotional field.

There may be a decrease in demand for things such as books, as people start reading from digital sources. We are, however, very hopeful that the market for paper will continue.

How has the paper industry been seeking to lobby parliamentarians over recent months? Have you found the government to be receptive to your concerns?

The paper industry has been very active indeed in lobbying Parliament. There has been a plethora of energy, climate change and environmental measures, which the government has been consulting on and will continue to consult on.

Generally speaking the coalition has been more willing to listen and consult than the previous government. They have been sending out all the right messages, such as David Cameron's recent speech on the need for growth.

Unfortunately, we are finding that when we get into the detail of policy, the potential cost impacts are huge for any energy-intensive industry, and the paper industry is obviously one of those.

There is major concern that government departments such as DECC and BIS have not done their homework in terms of looking at the cumulative cost impacts on industry of all the measures that they are proposing.

The measure we are most concerned with is the UK government's decision to go it alone and propose a carbon floor price. That has particular cost concerns, as does phase lll of the EU Emissions Trading Scheme, which comes into effect in 2013.

The TUC, together with the Energy Intensive Users Group, have been doing a lot of work to understand what the impacts are.

There is a major concern here, especially amongst the energy-intensive industries, which between them employ, directly and indirectly, about a million people in the UK. The ability of industries that rely heavily on energy to remain competitive is coming into doubt.

What are the biggest challenges facing the paper industry in 2011?

The primary challenges are to do with cost base. We are particularly concerned about things such as the cost of transport, which is dependent on oil prices.

We are also concerned about energy costs and the way in which these may increase. The fact that raw material prices are rising very sharply is also a concern.

All of these issues may well affect the industry's cost base.

These are all immediate challenges for the paper industry, but some of our greatest concerns are issues that will affect the industry in the medium term.

Have you been impressed with the coalition's approach to manufacturing?

I am very impressed with the messaging that the coalition government is sending out. They are certainly saying all the right things, but what remains to be seen is whether they will be able to transfer this rhetoric into actual policy.

There needs to be a proactive policy developed for manufacturing, particularly the energy-intensive industries.

Some ministers I've spoken to have accepted that there needs to be a way of working with energy-intensive industries. However, if you look at policy proposals, across a whole range of areas, this message is not coming through.

There is a degree of uncertainty as to whether or not government fully understands the cumulative impacts of what is being proposed.

It is increasingly evident that our future economic performance in the UK, and our future economic growth, are going to be much more dependent on manufacturing than has been the case in the past.

This will require a sea change in government generally, and I don't just mean with our politicians, I also mean with our civil servants. Government must have a much greater understanding of the impact of the policies they seek to implement.

It is also worth noting that most of the legislation that we deal with comes directly from Brussels. The paper industry needs to actively influence the course of events over there. A great deal of what comes out of Brussels ends up costing us more money and, as a result, does not help to advance our competitiveness.