Process Industries (Tees Valley)

– in Westminster Hall at 4:30 pm on 25th January 2006.

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Photo of Iain Wright Iain Wright PPS (Ms Rosie Winterton, Minister of State), Department of Health 4:30 pm, 25th January 2006

It is a real honour to secure an Adjournment debate on what I believe is a quality industry and one that is becoming increasingly so, especially in the area in which my constituency is located. I am also extremely pleased that my hon. Friend Ms Taylor and my hon. and learned Friend Vera Baird have joined me to discuss the important process industries on Teesside. I intend to cut short my speech to allow them to make contributions if they so wish.

I want to do two things today. First, I wish to showcase the growing significance of the process industries to the regeneration of the Tees valley and the wider north-east and United Kingdom economy. Secondly, I wish to raise with my right hon. Friend the Minister several matters that the process industries on Teesside fear may hinder their ability to succeed and grow, and provide further prosperity in my constituency and elsewhere.

I outlined in a previous Adjournment debate how the north-east economy is still in the process of recovering from the seismic shocks of the decline of its heavy manufacturing base. A failure to innovate and an abandonment of the region and of manufacturing industry by central Government in the 1980s led to the rapid decline of much of what had made Teesside and the north-east prosperous since the Victorian era. It led to mass structural unemployment in the region. Between 1981 and 1997, some 110,000 jobs were lost in manufacturing—90,000 of them in the Tees valley. That has contributed to the fact that the Tees valley economy now lags significantly behind the UK economy. As a sub-region, we have to grow much faster to catch up with the rest of the country.

Yet, amid such a depressing tale, there is much to be positive about. Despite the massive knocks that the area received in the 1980s and 1990s, we still have a resilient manufacturing industry, of which firms such as Corus are a leading part. What has struck me recently is how, in a quiet way, a modern manufacturing sector has emerged from the Tees valley that is leading the world. The process industries are by far the single biggest wealth-generating industrial sector in the north-east, and certainly in the Tees valley. The sector employs directly about 14,000 people in the Tees valley, with an estimated 140,000 indirect jobs in the sub-region that are reliant on the process industries. Some 60 per cent. of the contribution to the regional economy made by the north-east process industries comes from the Tees valley and, bearing in mind the importance of the sector to the regional economy, some 15 per cent. of the entire north-east gross domestic product is derived from process industries in the Tees valley.

The area has a range of firms that specialise in chemicals, pharmaceuticals, biotechnology and renewable energy. Firms such as Huntsman Petrochemicals provide high-quality chemicals and polyurethanes. Hart Biologicals in my constituency, led by Alby Pattison, is at the cutting edge of clinical diagnostic tools for hospital pathology laboratories. Firms such as Petroplus manufacture petrochemicals and push the boundaries of the future application of biodiesel. Those firms are providing high-quality, well-paid jobs to the people of the Tees valley. In the process, they are producing high value-added goods that improve our quality of life and help to redress the environmental damage that has occurred over the past century, and which can be exported throughout the world, improving the wealth of this country.

The nature of the industry means that innovation has to be a constant part of life. Research and development is a major part of process industries and I hope that the Government continue to ensure that an appropriate environment is provided for in that sector. Thankfully, I think that that is happening. The Centre for Process Innovation has been established in the Tees valley, with the support of the regional development agency, One NorthEast, as a major UK national resource that is designed to stimulate innovation within the chemistry process sector. The CPI employs 50 researchers and has close links with universities and businesses to ensure that the process industry has the best chance of succeeding. After only 18 months in operation, it has developed innovation projects that are worth £36 million for the Tees valley.

New processes that are being developed include the continuous oscillatory baffle reactor. I am sure that that is the first time that that phrase has been used in Parliament, so I am proud of having said it. I have no idea what it does, so "baffle" is an appropriate word, but I know that the process quickens chemical reactions and makes industries on Teesside more efficient, and therefore more able to retain our competitive advantage over the rest of the world.

The area of innovation about which I am the most excited is the development of renewable energy. Long-established skills in the region from the chemicals and oil industries make the Tees valley the best possible area to develop cutting-edge technology. Teesside is leading the way in the use of hydrogen to help to produce environmentally friendly energy, either through fuel cells producing lighting or as a substitute for petrol. Biomass technology is also being developed. SembCorp Utilities is building a £60 million power station on the River Tees, which will use surplus timber from forests and recycled wood to generate carbon-neutral electricity, and Biofuels Corporation, with One NorthEast funding, is building a new facility at Seal sands on the Tees estuary to produce alternative fuel from rape seed oil.

I have no doubt that with appropriate Government support the Tees valley will become in the next few years the most developed area for green energy not just in the UK, but in the world. I passionately hope that that status will produce well paid green jobs for the Tees valley, bringing the same prosperity to my area that Aberdeen saw from oil in the 1970s and 1980s, or that Teesside itself saw from heavy manufacturing in Victorian times.

Despite all that good news, the sector hid its light under a bushel somewhat until recently. There appeared to be reticence about promoting the good work being undertaken. Thank goodness that is no longer the case. About 200 companies in the sector in the Tees valley have come together to form the north-east process industries cluster—NEPIC. Under the chairmanship of Bob Coxon and with Dr. Stan Higgins as chief executive, that group is promoting the sector and pursuing initiatives such as raising investment in overseas trade, productivity improvement, raising skill levels and closing the GDP gap between the north-east and the rest of the UK. Those activities are designed to ensure the sector's continuing development and worldwide status.

I was lucky enough to attend the annual dinner of the north-east process industries cluster group last Friday in the constituency of my right hon. Friend the Prime Minister. Some 420 people from the process industries attended the event. There was a positive buzz and a great deal of confidence about the future of the industry on Teesside, and a recognition that what is being done is world class and will make a growing contribution to the continuing economic renaissance of the Tees valley.

Despite that, there are concerns that may hinder the process industry's progress. In winding up, will my right hon. Friend the Minister respond to those concerns, to ensure that the sector has the maximum opportunity to grow? The key concern relates to energy pricing. To me, that seems ironic given that a key pillar of the future of the process industries is indigenous energy regeneration. Many companies have seen gas and electricity prices double in the past 12 months. I understand that one company in the process industry on Teesside has seen its energy costs increase by £12 million, putting part of its business operations into loss and thereby questioning its continuing viability. The firm has some 500 employees in Hartlepool and is a vital concern to me and to the economy of my constituency.

Energy costs have resulted in the closure of plants such as that owned by Terra Nitrogen in the constituency of my hon. Friend the Member for Stockton, South, which is next door to mine. That plant employed a large number of people from Hartlepool, who have written to me to express their concern. I am worried about the domino effect of Terra's closure. The firm supplied basic raw materials to a large number of other companies in the Tees valley and elsewhere. Those companies now rely on foreign supplies and tell me that if we experience a bad spell of weather, meaning that North sea tankers are unable to supply, a number of Teesside plants will shut down and might not reopen. The situation is unsustainable and detrimental to the prospects of development for the process industries on Teesside. Firms on Teesside hope to see a concerted effort by the Government to achieve forward price stability and equitable energy pricing with competitors in Europe. I urge my right hon. Friend to do what he can to ensure that companies in Teesside are competing on a level playing field with overseas firms.

Another concern is skills. The demographic profile of the process industry is not encouraging. Although the legacy of the old ICI plants at Billingham and Wilton provides an unprecedented degree of experience, it means that the average age of scientists and engineers is over 50. The industry has been unable to underpin its recent growth with an appropriate number of trainees.

The news is not all bad. I recently had the pleasure of meeting Leanne Hart, a constituent of mine working for AMEC who is the chair of the north-east and Yorkshire young persons network. The aims of that network are to share good practice, promote skills in the industry and act as ambassadors for the sector. Despite her good work, and that of others, we still need to improve the attractiveness of modern apprenticeships. As a country, we also need to do more to help to steer young people contemplating university into science and engineering courses. Will my right hon. Friend respond to that point?

Most crucially, to address the gap, I urge the establishment of a process industries national skills academy. Given that the Tees valley is the premier area for process industries in the UK, I ask that such an academy be based in the north-east, and of course I add that Hartlepool has a wide and attractive range of business premises where it could be located.

My third and final point, which companies have raised with me, is the impact of European legislation, particularly the registration, evaluation and authorisation of chemicals, known as REACH. Firms are concerned that the cost of implementing REACH will far outweigh the benefits. It is having a particular impact on a leading company in my constituency, Oxford Chemicals, led by Dr. Richard Smith. I have been told that the UK authorities are particularly zealous in ensuring compliance with REACH, in contrast, perhaps, with some of our European neighbours. I should be grateful if the Minister explained how he and his Department are working with the European Union to ensure a level playing field for our companies.

The process industries in the Tees valley are examples of how the UK is leading the global economy. Such products will become increasingly important in modern life, and the fact that Teesside is leading the way should produce enormous and sorely needed benefits to prosperity for our region. To fly to its maximum height, however, the sector requires Government assistance and facilitation, and I hope that my right hon. Friend will set out in his reply how that assistance will be provided.

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REACH attempts to prevent amongst other things the continuing polluting of us,our air,water,soil/from poisons/pollutants that some industrys seem unable/unwilling to do.If it was implemented in its original form more chemicals etc would of been targetted.

Being against anything that seeks to help with the slow poisoning of us/earth not anything to be proud of......

Submitted by stinky will

Photo of Dari Taylor Dari Taylor Labour, Stockton South 4:41 pm, 25th January 2006

It is a great pleasure to follow my hon. Friend Mr. Wright, and I congratulate him on securing the debate, which is both timely and valued.

I wish to talk for a few moments about the north-east process industries cluster, which is an important group for us in the north-east. It employs in excess of 300,000 people, and produces more than 25 per cent. of the region's gross domestic product, which in effect is more than £8 billion of the United Kingdom's GDP. Those figures show just how important that group of industries is. As my hon. Friend stated, it is a crucial part of the regeneration of the Tees valley, most significantly in my constituency. Like him, I should like to hear how the Minister proposes to support the continued development of the process industries cluster in the north-east.

Critically, the group not only employs well, but pays well. The Tees valley has the biggest petrochemical industry in the UK and the second biggest in Europe, and that is crucially valuable to us. Development and investment in that industry in the area demonstrate a growth in confidence, and the spiralling effect of that investment is seen across the whole of industry in the Tees valley.

Teesport is an incredibly valuable port—the second biggest in the UK. It is in the constituency of my hon. and learned Friend Vera Baird, although its headquarters is in Middlesbrough. It is another very valuable piece of the whole kit of developing and delivering a new industrial structure for the north-east. I would greatly appreciate it if my right hon. Friend the Minister acknowledged that leaving Teesport out of the development of a national port strategy is profoundly wrong and very damaging for the north-east.

In only three years, more than £1 billion has been invested in the process industries cluster, and we have seen what that investment has achieved: the creation of 1,600 jobs. This is powerful and it needs to be appreciated. We need to acknowledge the risks that are being taken by the industrialists who deliver such things.

I have so much more to say, but my hon. Friend the Member for Hartlepool has said it for us. There are concerns about energy and the age profile of our skilled engineers, which is over 50—I personally think that that is a golden age, but I understand that we must have a younger profile for industry development—and REACH is problematic, not because it is a regulatory document, but because in Britain we will put it together in terms of dots and commas and we are not confident that people in Europe will.

We have a growing, vibrant, new tomorrow for the 21st century. We want that to be supported. I hope that the Minister, who is hearing the plea from all of us, will accept our statements. With a little support, we will move into the 21st century as we ended the 19th, and as we went through much of the 20th century—with a vibrant region.

Photo of Vera Baird Vera Baird PPS (Rt Hon Charles Clarke, Secretary of State), Home Office 4:45 pm, 25th January 2006

I am grateful to my hon. Friend Mr. Wright for allowing me to express my support for the north-east process industry. I congratulate him on securing this debate and thank him for his generosity in being prepared to share it.

I attended the north-east process industries cluster—NEPIC—in London on 17 November, to which both my colleagues referred, which was launched by the Secretary of State for Trade and Industry and the Secretary to the Treasury, my right hon. Friend the Government Chief Whip. That body is intended to support the whole process industry, a major base of which is the Teesside chemical industry, and a large part of which, although by no means all of it, is based at the Wilton International complex in Redcar. I was pleased when NEPIC decided that it was going to put its headquarters at Wilton International as well. I have to tell my hon. Friend the Member for Hartlepool that I am sure that we have one of those battle zones in Redcar, if he has one in Hartlepool, and I am sure that we are working it very hard.

Setting up NEPIC was an excellent move, because it merged the Teesside chemical initiative, which had been the Teesside chemical representative group, with the pharmaceutical groups and other related groups from further north in the county, around Tyneside and Northumberland, thereby potentially generating good links between industries that obviously have a commonality and providing them with an opportunity to help each other. I hope that that is a precursor of better links, generally, between Teesside and Tyneside, which have not always given each other the mutual support that they should.

I want to speak briefly about a key partner for NEPIC in its endeavour to bring us a golden future. A major instrument of its future success is Teesport, which was mentioned by my hon. Friend Ms Taylor, and which has recently been taken over by a consortium of investors called Endeavour Ports. It is the second largest port by volume and is—it goes without saying—in Redcar, where all good things are. Its new owners will support and continue the effort that has been commenced to establish and develop a deep sea container terminal at Teesport.

NEPIC estimates that between £8 billion and £10 billion of investment should be pumped into the process industries in the north-east in the next 10 years. Teesport is crucial. It handles 65 per cent. of the chemical and pharmaceutical sectors' goods for export, which is more than £5 billion of the total investment, and NEPIC fears that it could be threatened if it does not develop as we hope it will.

One NorthEast and ourselves had campaigned for the Government to halt expansion at ports in the south—Felixstowe, Harwich and Shellhaven, on the Thames—and instead allow investment to flow into Teesside. The fear was that if Shellhaven, Felixstowe and Harwich all developed, or if most of them did, it would be difficult to persuade shipping lines to move to Teesport with their container cargo. Two of the three consents have now been granted; none the less Teesport, with its new ownership, has resolved to move as fast as it can to apply for a harbour revision order to develop the deep sea container port.

Teesport is renewed in its confidence, because it has recently obtained an Asda import centre, through which a large proportion—90 per cent., I think—of all Asda's clothing line will be imported into the UK through Teesport. That indicates that it is practical to make shipping lines reroute to Teesport, because of the calibre of its facilities, the labour available and so on. Presumably, those shipping lines already appreciate that the climate-friendly elements of a shorter distribution network to the north-east, north-west and Scotland also stand them in good stead.

The whole community backs the development of Teesport, and I understand that the conservation bodies are not likely to cause any difficulties. All the politicians back the development of Teesport, too.

The way in which the process industry does business these days is changing. The industries are more and more specialised, and goods are shipped out not by tanker but by container—a large percentage of them through Teesport, so it is crucial that it should develop.

The chief executive officer of north-east process industries cluster, Professor Higgins, has said:

"Teesport, of any European port, is the best located for the expansion of Europe. If we are going to take goods to and from Poland, Lithuania, Russia, we would take it though the Baltic or take it across to Rotterdam and drive it across Europe. Which is the best located port for those areas? Teesport."

I hope that the Government appreciate the strategic advantage for the port and for the process industries. It is the view of One NorthEast that the successful development of Teesport as a deep sea container terminal is also of national significance.

If it is feasible for him to do so, I should be pleased if my right hon. Friend would undertake to do his best to ensure that there are no obstacles in the way of the development so that our golden future in the Tees valley will not be held back.

Photo of Alun Michael Alun Michael Minister of State (State (Industry and the Regions)), Department of Trade and Industry 4:50 pm, 25th January 2006

I will answer as fully as I can within the limited time available. I thank my hon. Friend Mr. Wright for inspiring the debate and being assiduous, as ever, in promoting the interests of his constituency. I am pleased that he endorsed the excellent work of the north-east process industries cluster, which I shall try to avoid referring to by its acronym. It is an unexpected pleasure to have the presence of the well-known parliamentary songbird my hon. Friend Ms Taylor and my hon. and learned Friend Vera Baird. I shall try to cover briefly some of the most important points, but as many issues were mentioned I will also write to my hon. Friends and expand on some of those matters.

I wholeheartedly agree with my hon. Friend the Member for Hartlepool about the important role that the process industry in Tees valley plays in our wider economy now and will play in the future. My hon. Friend's remarks are a testament to the fact that it is not a sunset industry; the sector itself is grasping the opportunities of increasing skills, of taking its place in the knowledge-based economy and of making genuine strides in commercialising new technologies and ways of working.

My hon. Friend rightly said that the industry has responded to the need to operate in a cleaner environment and to avoid the damage that was done in the past. Times have changed; this country can be very proud indeed of our success in getting the REACH proposals agreed in December during the British presidency. The initiative started in the previous British presidency in the late 1990s and came to fulfilment during our latest presidency.

The reason why we should be so proud of REACH is that it was amended from a very bureaucratic set of proposals by the Commission as a result of the UK-Hungarian suggestion of a one substance, one registration proposal. Initially, it had no other supporters, and the new member state worked very closely with us.

I pay tribute to the Chemical Industries Association, especially Judith Hackett, who is about to move on from her role, for the way in which it engaged with environmental campaigners, animal rights organisations and a variety of industries from Ford to Marks and Spencer, the chemical industry itself and downstream users, in putting forward practical proposals. That is why I am slightly surprised by the reference to excessive administration. The proposals were agreed as recently as December, so the company in Hartlepool may have sounded a note of unjustified pessimism.

I believe it was in this room that I introduced the regulations on paint, and Opposition Members—there were Opposition Members present on that occasion— said that they would put fresh burdens on British industry. They had to change their stance when scribbled notes from the industry representatives down at the end of the room pointed out that consistent regulations would be applied across Europe, and that the UK industry, which was already operating to high environmental and health protection standards, would benefit from similar burdens being placed on their competitors in other countries.

I should point out that REACH will replace more than 40 pieces of legislation, and one regulation means better regulation; it will help to reduce the overall bureaucratic burden. As a result of our initiatives, much has been done to streamline REACH and make it more cost-effective. I will happily lay out some of the other benefits of the proposal for my hon. Friend.

My hon. Friend also referred to the importance of skills development within the industry, and I agree with him on that. Service industries in particular have to operate on improving their processes and increasing skills. On Monday I went to see another process industry, a printing plant. I was really impressed by how specific manufacturers and producers in the industry are working to squeeze every last benefit from the improvement of skills, and how they are engaging the work force in how the processes are undertaken. That is why the employer-led sector skills council and the regional skills partnership are so important in starting to deliver; they cover so much of the work force.

I agree with my hon. Friend about the importance of supporting young people in modern apprenticeships. One of the challenges for a region such as the north-east is encouraging young people to be ambitious about their skills and qualifications and, in many cases, about the entrepreneurship that they can bring to bear, either individually by setting up their own business, or as entrepreneurs within large industries such as the process industry. I would be happy to talk to my hon. Friend about that, because the issue of how we get that message across in the north-east is important to young people in the constituencies of my hon. Friends the Members for Hartlepool and for Stockton, South, and my hon. and learned Friend the Member for Redcar.

My hon. Friend the Member for Hartlepool rightly referred to the impact of energy prices, and we certainly understand the tough conditions that high energy users are experiencing. He will be aware that my right hon. Friend the Secretary of State has, at the request of the Prime Minister, promoted an energy review that looks to the long term. We are carefully looking into the surprising prices spike, and the impression that perhaps not all supplies were as readily available in the UK as they should have been towards the end of last year.

My hon. Friend will also be aware that steps taken by Government mean that supplies will be increased considerably in the coming year, what with the new terminals, and what is happening in Pembrokeshire. Also, a variety of other approaches that have been a long time in preparation are coming to fulfilment; that will help us to deal with the faster than expected decrease in availability of North sea gas, other pressures on the energy industry, and the knock-on effect on industry. So steps are being taken to help industry to compete.

My hon. Friends have referred to the development in Teesport. I should point out that PD Teesport has sought a screening and scoping opinion from the Department for Transport, and the Department has responded. The next stage in the process will be a formal harbour revision order application to the Department. If one or more objection is received, an inquiry has to be set up. It would not be appropriate for the Government to speculate on the merits of the application before it is received, nor once it is under consideration. However, I assure my hon. Friends that careful consideration would be given, and the importance of the port and location of Teesport is fully recognised by the Government.

The work of the cluster arises from the merger in 2005 of the pharmaceutical and speciality cluster and the Teesside chemical initiative. The new and inclusive organisation will co-ordinate intellectual, business and financial support mechanisms for some of the major corporations in chemicals, pharmaceuticals and biotechnology in the region. That is of enormous significance. I agree with my hon. Friend the Member for Hartlepool and his colleagues about the importance of that development, which builds on the sector's many decades of commitment to the region.

My hon. Friend rightly said that the sector had weathered many booms and busts, and that some industries had survived and others had not. The process industry represents 25 per cent. of the whole economy of the north-east; that demonstrates its importance. So I understand why my hon. Friends are so keen to make sure that the Government understand and respond to its interests.

It being Five o'clock, the motion for the Adjournment of the sitting lapsed, without Question put.