Growing risk to material supply as UK approaches 'end of an era'
The Government is being urged to act now over escalating risks to the supply of essential manufacturing materials.
A new report, released today (8 July) by the manufacturers' organisation EEF, claims that the global growth of middle-class consumers combined with an increased demand for all commodities and an over-reliance on China for strategic supplies is leaving the UK 'vulnerable'.
"As we approach the end of an economic era, we cannot afford to be left underprepared and overexposed," said the EEF's policy advisor Susanne Baker.
"Manufacturers have sounded the alarm over the growing risks to material supply and others are now picking up the clarion call. But while competitor nations are already taking evasive action, our Government is in danger of burying its head in the sand."
In the past decade, commodity price volatility has been higher than at any other time in the previous 100 years, with average resource prices having doubled since 2000. But, while other manufacturing nations have strategies in place to shield their economies from resource risks, the EEF claims the UK is lagging behind.
Britain's supply of essential materials - ranging from silicon metal and rare earth elements through to cooking oil - is concentrated. China remains the leading supplier of these materials to the UK, producing 22 of the 38 elements deemed to be of 'strategic economic value'. These are minerals and metals that are vital to British manufacturing.
"Resource security is dynamic and complex," added Baker. "It requires a flexible response working in close cooperation with industry and other stakeholders. But key to this must be a joined-up, thought-through approach across relevant policy areas.
"Given how crucial material supplies are to the UK's wealth and economic stability, there is clear case for a new Office of Resource Management to act as a central hub of expertise, data and stakeholder liaison and to co-ordinate the UK's response to these risks."
Competitor nations, such as Germany and the USA, have already implemented sophisticated resource strategies seeking to minimise supply risks, enhance resource productivity and regulate waste for economic value. The EEF says the UK Government 'has so far responded weakly'.
"More support could be given to capital investment in resource efficient technology," said Baker. "The Enhanced Capital Allowance Scheme provides tax-breaks to firms investing in energy efficient equipment and some water saving equipment. This should be extended to technology that supports resource efficient investments. We believe the whole scheme should be revitalised and then heavily publicised to stimulate investment in this space."
Supply and demand
The organisation is urging the Government to move to mitigate material supply risks by:
- Establishing an Office of Resource Management (ORM) to strategically co-ordinate action across Whitehall.
- Thoroughly and regularly assessing material supply risks and vulnerabilities.
- Providing stronger incentives for resource efficiency to help overcome market failures.
- Regulating waste so that we extract more economic value from what we discard.
Baker's view is that the new ORM should sit under the aegis of the Department for Business, Innovation and Skills (BIS) rather than Defra. She told edie: "A unit's location will help to define it - partly by the expertise of those working around it but also through the department's ethos. BIS is the department charged with creating the conditions for business success and promoting innovation, science and enterprise. It is home to the Green Investment Bank, the Green Economy Council, the Technology Strategy Board and the Government Office for Science - all of which are involved in advancing the green economy and resource efficiency.
"The ORM's role is similarly about ensuring economic growth through resource resilience, efficiency and innovation. Our view therefore is that the Office should be located within BIS where it would benefit from intra-departmental collaboration."
The report concludes with a caution that 'we are coming to the end of an era'. In 2010, the EU deemed 14 materials to have supply risks. This has now increased to 20 materials and includes those used in consumer electronics and telecoms products, engineering/construction, agriculture, aerospace and steel and aluminium production.