Warning as reduced gas tax ends
Manufacturers say removal of EU exemption will leave them at a competitive disadvantage
Large manufacturing firms in Northern Ireland have warned that losing a low tax rate on gas will leave them at a competitive disadvantage.
The planned removal of the reduced rate this autumn could add up to 3% to company gas bills, according to trade body Manufacturing NI, which represents companies including planemaker Bombardier Aerospace, shipbuilder and offshore energy giants Harland & Wolff, and Michelin.
Northern Ireland was originally granted an exemption by the EU for the Climate Change Levy (CCL) on commercial gas back in 2001 to promote the expansion of the developing gas network.
The exemption lasted for 10 years until April 2011, when HMRC introduced CCL to gas supplies here at a reduced rate for a strictly limited period of two years until the end of October 2013.
In April, Northern Ireland's Department for Enterprise, Trade and Investment approached HMRC with a view to having this reduced rated extended.
However, HMRC has cited an EC directive which forbids any extension of the reduced rate.
The levy does not apply to domestic users or electricity generators, so there is unlikely to be any knock-on effect on electricity pricing.
Manufacturing NI chief executive Bryan Gray said that the loss of this exemption was a major blow to companies struggling with some of the highest electricity prices in Europe.
"Manufacturing NI estimates that this increase will add between 2.5% and 3% to company gas bills dependent on the gas price originally agreed," he said
"It will affect the viability of many existing 'combined heat and power' plants and may have a negative impact on the feasibility of the proposed gas pipeline to the west of the province.
"Some companies with a quality assessed CHP plant and those with a Climate Change Agreement in place may qualify for a partial exemption from the full tax."
A spokesman for Bombardier Aerospace, which works on Learjets and is making the wings for the new CSeries jet in Belfast, has regularly pointed out that its Northern Ireland plants have the highest energy bills in its network.
"Any increase to our already high energy costs would directly affect our competitiveness, and therefore our ability to both retain work and win new work," he said.
"Energy costs are more than three times higher than those of our sister sites in North America, and significantly higher than many of our competitors.
"So it's vital that our energy costs are reduced, particularly as we expect to increase our energy usage following recent major investments in new programmes."
Bryan Gray also hit out at proposals from the Department of Energy and Climate Change to introduce a so-called 'Energy Savings Opportunity Scheme' which will call on large companies with a workforce greater than 250 to conduct formal energy audits every four years from December 2015, which he says could add to their administrative burden.
"The proposals fail to take account of the fact that energy costs are so high that virtually every company has adopted energy saving policies and equipment over the past few years," he said.
"Any savings left are likely to come at a high capital cost with long paybacks.
"The low hanging fruit has all been picked."