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China Clay Industry (Job Losses)

Volume 575: debated on Wednesday 5 February 2014

Motion made, and Question proposed, That this House do now adjourn.—(Anne Milton.)

I rise tonight to speak about the recent news of significant job losses in my constituency in the china clay mining industry. First, let me put it on the record that I, on behalf of the communities that I represent, thank the emergency services, local councils, Cornwall council, the Environment Agency and scores of volunteers who have spent many hours over the past two days tackling the damage caused by the recent storms that have hit Cornwall.

In recent hours, people in Cornwall will have come together in the finest tradition of the Cornish motto, “One and all”. Although it remains my privilege to represent a part of the country that demonstrably shows such community spirit, there are issues that the Government must tackle to improve resilience to flooding events and to ensure that they do their part in the same way that local communities are doing theirs.

Mr Deputy Speaker, you and other hon. Members will be aware that the china clay industry in Cornwall is more than 260 years old and has played a formative part in Cornwall’s cultural history. On his discovery of china clay in 1746, William Cookworthy began to experiment to produce hard-paste porcelain and finally patented his formula in 1768. With control over the use of china clay and china stone for porcelain manufacture, Cookworthy opened his own pottery in Plymouth, moving to Bristol in 1770. Four years later, Cookworthy retired and transferred his business to his partner, Richard Champion, who almost immediately applied for an extension of the original patent. However, that was met with fierce opposition from the potters of Staffordshire, led by Josiah Wedgwood, who were keen to use china clay for their own wares. After Champion’s monopoly was broken by the Staffordshire companies they leased their own pits in Cornwall, but by 1830 they had given up control of production to others and bought their clay from agents or groups of adventurers who would later found the first china clay companies.

Production increased with the discovery of other uses of china clay and by 1858 42 companies were producing about 65,000 tonnes of clay a year. Today, Imerys Minerals Ltd is the single producer of china clay in the area and almost 1.5 million tonnes of clay is produced annually in Cornwall and Devon.

There is no settlement in my constituency untouched by the clay industry. Sky tips still tower above St Austell bay and intricate networks of viaducts and old settling pits still stretch out from wooded valleys. Many of the coastal towns, including Newquay, have at some point been centres of the export of china clay around the world. Like many parts of our country with a traditional industry that has dominated local employment for decades, many generations of families have worked in the industry with, until recently, a presumption that there were well-paid jobs for life.

The decline of the industry has been mirrored by the decline of some communities in Cornwall. Communities that used to be aspirational have had their sights set lower and communities that used to be outward-looking have turned in on themselves. The sad reality is that in many of the former china clay mining villages in my constituency—such as Bugle, Nanpean, St Dennis and Penwithick—we have seen a transition from generations of families working in the same industry to a generation of families not working at all. Educational attainment is low, health outcomes are poor and families struggle to make ends meet. Despite intervention from successive Governments, regenerating the communities will take time. That time means that some of the people affected will not be able to make the most of their lives.

Let us also be clear that the modern clay industry contributes significantly to the economy of Cornwall and that should not be underestimated. Worth £155 million per year, it is a huge financial asset to the duchy and is one of the UK’s most valuable mineral exports, second only to North sea oil and gas.

Globally, Britain is the world’s fourth largest producer and exporter of china clay and Cornwall is at the very heart of the industry. Indeed, china clay from Cornwall accounts for 88% of total UK sales and none more so than that from the pits around St Austell. Huge white pits make a good third of my constituency look like a lunar landscape, as anyone who has flown into Newquay airport will be able to attest.

The industry, however, has struggled in recent years. In 2010, 1 million dry tonnes of clay were sold, but in 1988 that figure was almost three times higher at 2.8 million tonnes. As with other industries, emerging markets in Brazil and China have undercut exports and alternative processes, in paper processing for example, have reduced demand. As a result the number of people employed locally has plummeted from a high point of some 13,000 across Cornwall and Devon to just about 900 today. In an industry that is located among a few small towns, the recent news of extra job losses is acutely felt.

Imerys, a French-owned company and the largest producer of china clay in the world, acquired English China Clays in St Austell back in 1999 for £756 million, along with its then 2,000 employees. Sadly, recent job losses have been all too common in the industry. In 2006, Imerys made 800 people redundant, which was a devastating blow to the communities affected in both Devon and Cornwall. At the time, the local community was told that these losses would shore up the operation and provide additional resilience and that the jobs left would be secure in the long term. However, it has been announced in recent weeks that the company will be shedding a further 70 jobs. Some hon. Members might think that 70 is a relatively small number of job losses, but it is not just 70 jobs; it is 70 families, 70 homes and 70 stories of personal hardship. The news is of course devastating for the families involved, as it will likely mean hardship and stress for months, if not years, to come.

Furthermore, some skilled, technical jobs at the Imerys laboratories in Par Moor are being relocated outside Cornwall, leaving people with a stark choice: to tear up their family roots and move up country to keep an insecure job, or to lose it altogether. Put simply, job losses, industrial decline and outsourcing of skilled work from Cornwall are exactly the opposite of what this Government are trying to achieve nationally and locally.

As if that was not bad enough for a part of the world that is already struggling, there is potentially worse to come if the Government do not act. Of particular concern is the European Commission’s current investigation into the aggregates levy. The levy was introduced over 10 years ago to discourage the use of primary sources of aggregates from deposits beside rivers and quarries and to encourage the use of recycled or secondary materials instead.

There were, and are, good environmental reasons for the levy, but the large producers do not like it, of course, and have been lobbying for its removal for some years. Last year, having failed to convince the UK Treasury, some persuaded the European Commission that the levy was unfair and should be investigated as a possible unfair state aid to those companies selling secondary aggregates and avoiding the levy. The Commission launched an investigation and the Treasury then decided to suspend the levy.

The china clay industry in Cornwall is directly affected by the suspension of the levy. The industry sells secondary aggregates as a by-product of china clay production. For every tonne of china clay produced, some 9 tonnes of waste have to be disposed of, mostly in the large tips that are a feature of the mid-Cornwall skyline. However, some of the waste can be processed further into secondary aggregates, for example for use in the construction of the London Olympic stadium at Stratford, and there is growing demand for secondary aggregates for the many building and construction projects currently under way, particularly in the south-east, where the customer wants to demonstrate a green policy by using secondary aggregates, rather than primary ones.

Secondary aggregates can be transported either by rail or by sea through the port of Fowey. It is estimated that that market could grow to over 1 million tonnes within a few years. Of course, we all know that a green alternative must not cost the customer much more, so the business relies on being exempt from the £2 per tonne aggregate levy to balance the additional cost of transport. All that is at risk if the European Commission is persuaded by the major primary aggregate producers that china clay waste is not actually a waste but is mined to sell as aggregate. It is an odd argument: who would bother to mine it when there is perhaps 500 million tonnes—the result of decades of china clay production—sitting in tips in and around St Austell?

The Commission’s consultation on the matter has just closed, and I am grateful that my right hon. Friends in the Treasury have already submitted a helpful and robust response, no doubt recognising that it is in the Treasury’s interests not only to retain the levy, but to increase it to encourage further the use of secondary aggregates. I, too, have submitted a robust response, as has Graham Watson, the Member of the European Parliament for the South West of England.

Let us be clear that between 300 and 500 jobs in the St Austell area are at risk if china clay waste loses the exemption from the aggregate levy. Tonight, I would like to reiterate my plea that the Government ensure that the European Commission is given the full facts and that Ministers lobby as hard as possible to allow the exemption to continue, for good environmental reasons, for Cornish jobs and for more revenue for the Treasury. Those are three wins for which I think it is worth us, as a Government, fighting.

The china clay industry is as much a part of Cornwall’s history as tin mining, fishing or farming. It remains one of Cornwall’s largest employers and is responsible for millions of pounds going into the wider economy each year, and it still employs just under 1,000 people. It is an industry that I am proud to have spent some time working in, as did my mother, my grandfather and many other members of my family in Cornwall. The industry deserves recognition from Government for the vital role that it plays in helping to support the Cornish economy, and recognition from all of us for the wider role that china clay plays in our lives. From paints to plastics, and pharmaceuticals to paper, china clay is one of the unsung heroes of the modern world.

I ask the Minister to recognise the industry’s role in Cornwall, to join me in meeting senior industry representatives to discuss what more the Government can do to ensure its continued success, and to work to ensure that every resource of Government is put in place to help and support those who recently found out that they have lost their jobs. The china clay industry remains as vital to Cornwall’s future as it has been to our past. I hope the Government will join me today to work towards ensuring that this is not another great British industry that we let slip out of our hands.

I congratulate my hon. Friend the Member for St Austell and Newquay (Stephen Gilbert) on securing a debate on this important issue. We recognise the importance of the china clay industry to his constituency and to the region as a whole. It is inextricably woven into the industrial fabric of the west country. Any visitor to St Austell is, as he said, likely to be struck by the impressive sharp peaks known as the “Cornish Alps”, which dominate the surrounding landscape and represent the most visible part of a story that, as he told us, goes back some 250 years.

Imerys is a major employer in the south-west, and its plans to make redundancies as part of a restructuring exercise following the recent merger will clearly have come as a major blow to the employees concerned, to their families, and to the communities in which they live. I fully appreciate the potential implications of this for St Austell and the surrounding area. This was of course a commercial decision for the company. I understand that it has been forced to make some difficult decisions in order to remain competitive and to safeguard the future of its operations in the United Kingdom.

Naturally, we want to keep as many jobs as possible here in the United Kingdom, but it is not for the Government to tell companies how to run their businesses. We certainly recognise that they face fierce competition from low-cost economies, particularly in basic raw materials such as china clay. We operate in an increasingly globalised, competitive environment and, as I am sure my hon. Friend would agree, the Government have to be careful not to respond with protectionist measures.

I believe that the redundancies to which my hon. Friend has drawn the House’s attention will take place towards the end of February and will be voluntary. As recently as 22 January, Jobcentre Plus approached the company to offer support through its rapid response service. Imerys has engaged Penna, a third-party provider of support, to advise the people affected. I want to tell my hon. Friend that Jobcentre Plus stands ready to work alongside Penna and Imerys should it be asked. Although these redundancies are a commercial matter for Imerys, we are working with the company on the important issue of energy costs, and UK Trade & Investment is actively engaged with the company as regards assistance with exports. More widely, other Government measures are in place to promote growth and job creation in the Cornwall region.

Britain is one of the world’s largest producers of china clay after Brazil, the United States and China. China clay is our second most valuable minerals export after hydrocarbons. However, china clay sales have been on a declining trend since 1988. Increased competition in the global markets for paper clays has reduced profitability for many producers. Brazil has enormous deposits of high-quality clay in the Amazon basin and low production costs, making it highly competitive globally, despite the additional shipping costs. The industry, including Imerys, has responded by effecting structural change and investing in more efficient production methods. It has restructured its production in Cornwall significantly since 2006, and that has sadly resulted in the loss of over 800 jobs over this period. However, as my hon. Friend will know, there have also been closures in this industry in other parts of the world, including the United States.

I understand the pressures being faced by the energy intensive industries, such as the china clay sector, in terms of their international competitiveness, and I am extremely concerned about the impact of relatively high energy prices. The Government are very clear that decarbonisation does not and should not mean deindustrialisation. There would be no advantage—for our economy or in terms of global emissions reductions—in simply forcing UK businesses to relocate abroad.

On electricity prices, we have implemented measures to reduce the impact of policy on the costs of electricity for the most electricity-intensive industries. We are arguing in Europe to avoid another renewables target, which would simply serve to increase European electricity prices further.

We have already begun to implement the £380 million compensation scheme, which runs until March 2016, for electricity-intensive businesses, to help offset the indirect costs of the carbon price floor and the European Union emissions trading system, subject to state aid guidelines.

Imerys responded to our consultation on the compensation scheme and made a case that the mining of clays and kaolin are electricity intensive and, as such, should be included in the compensation scheme for the indirect costs of the carbon price floor. Based on the information Imerys provided, the Department for Business, Innovation and Skills will seek to compensate the mining of kaolin and clays, along with a range of other electricity-intensive sectors, as part of our state aid case to the European Commission.

I recognise that the job losses have been announced against a difficult economic backdrop for the region. The Cornwall economy faces a number of challenges, which are reflected in low wages, low productivity and relatively low skills attainment. The Cornwall and Isles of Scilly local enterprise partnership now leads local partners in analysing the local economy, building partnerships across key delivery agencies and prioritising investment in growth. The partnership is in the process of developing its strategic economic plan and investment framework, which will deliver sustainable growth through innovation, increasing competitiveness, consolidating existing assets and capitalising on opportunities presented by the region’s distinctive natural resources. The plans balance support for bedrock industries, such as food, farming and marine, with support for new industries, such as wave energy, geothermal and digital media.

The partnership will have the opportunity to negotiate a growth deal with Government during the period from April to June and to secure its share of the £2 billion local growth fund, which will come into operation from April 2015. In addition, the regional growth fund is providing grants to small and medium-sized enterprises and enabling infrastructure in the region, and just over £6 million has been made available through the Growing Places fund. As a category A assisted area, Cornwall and Isles of Scilly is also eligible for convergence funding from the EU, with some £520 million allocated for the seven-year period beginning this July.

The Newquay Aerohub enterprise zone, centred on Newquay airport on the north coast of Cornwall, will include areas with airside access. The provision of substantial hangar, manufacturing and office space is expected to deliver more than 5,000 jobs. The focus will be on aviation and aerospace activity, including aircraft maintenance, aerospace manufacturing, flight testing and trials of unmanned air vehicles and related training activity.

Plymouth was one of the 20 locations announced in wave 2 as being able to bid to central Government for a city deal. It will be a twin-LEP city deal with Cornwall and Isles of Scilly, and we hope that that will contribute to a deal based on strengths in advanced engineering and design, marine renewable energy, maritime and sub-sea operations and supporting technologies. The deal seeks to do that by increasing the commercialisation of research in these areas and increasing exports from its high growth.

On the specific issue quite rightly raised by my hon. Friend, he will understand that the aggregates levy is a matter for Her Majesty’s Treasury. He has already informed the House about our vigorous response to the state aid investigation. The European Commission is of course perfectly entitled to ask questions about any of these levies and schemes, and we have a number of cases before it at the moment, but as a member state, we are equally entitled to respond robustly and to defend the various arrangements we have put in place. I am not at the moment able to give him any more information about the exact state of the investigation or the timetable involved, but I am happy to write to him as soon as I get more information.

My hon. Friend made a powerful case about the uses of secondary aggregates both in construction and as one of the greener sources of material, and I do not see any need to add to what he has said.

Finally, let me accept my hon. Friend’s invitation to meet him and the industry. As the Commission investigation draws to a close, I would be happy to see him and the industry to discuss all the issues in more detail. I again thank him for drawing the attention of the House to this important industry and the future that I believe it still has.

Question put and agreed to.

House adjourned.