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UK PBR signals higher costs for cement industry

World Cement,

In the UK’s Pre-Budget Report 2009 it was announced that the climate change levy discount rate has been reduced from 80% to 65%.

Higher costs
Under the Climate Change Levy, energy intensive industries with Climate Change Agreements can receive up to 80% rebate if they meet demanding energy efficiency targets. In 2008, a low energy consumption year thanks to the impact of the recession, the net cost to the UK cement and lime industries was £5 million. At 65% and in a stronger growth year, that cost could reach £9 million.

UK MPA response
In response to the announcement, the UK Mineral Products Assocation’s Chief Executive Nigel Jackson said: 'The cement and lime industries, like many others, are going through one of the deepest and most prolonged recessions since the Second World War. Year on year, cement sales are down by almost 30% and the industry is shedding jobs. The new cost doubles the amount the industry has to pay in Climate Change Levy. This is yet another fiscal burden on businesses that provide essential mineral products, which are already struggling with the impact of the recession. The Chancellor seems to be oblivious to the fact that if we want to attract and retain foreign direct investment in this country then we have to put the right economic and fiscal framework in place to it make it better than investing elsewhere. This tax grab is not the way to do it.'

Challenging times
This latest announcement compounds the impact of the 2006 budget, when it was announced that from 2007 the climate change levy would increase in line with inflation. It also coincides with higher electricity costs. All in all it spells bad news for the UK cement industry, which is already struggling with reduced demand and ever more stringent environmental controls.

To end on a positive note, the UK cement industry has improved its energy efficiency by 33.7% between 1990 and 2008 against a target of 23.5% under its Climate Change Agreement.

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