Loss-making Anglo-Dutch steel group Corus will have to pay the lion's share of an annual £10m climate change levy facing the UK's steel industry, in addition to funding a £40m upgrade of its operations to meet DTI environmental requirements.
A spokesperson for Corus told AccountancyAge.com: ‘The government has set the targets for the industry and we have to meet them. There is very little room to manoeuvre.’
As things stand Corus’ climate levy bill could reach £8m a year. Adding to this cost, upgrade work would be needed to bring Corus’ carbon dioxide omissions in line with ratios prescribed by the Department of Trade and Industry.
If the upgrade work were completed, however, the UK’s largest steel producer would be in line for a government rebate on the levy.
However, according to Corus, the rebate is unlikely to have any impact on its plan to restructure its UK operations.
‘We are currently reviewing all our operations in the UK, and closures and job reductions are still likely to take place,’ the spokesperson said.
Corus is currently struggling with massive losses from its carbon steel production which, in the first half of 2000, generated operating losses of £226m, despite its stainless steel and aluminium operations making healthy profits. For the nine months to 1 July 2000, the Group made a combined operating loss of £96m.
The poor performance of its carbon steel plants has been blamed on a number of factors including the shrinking UK carbon steel manufacturing industry, a weak euro: sterling exchange rate and the increasing number of imported steel products.
Already, the government has stepped up its effort to prevent plant closures. The Welsh national assembly has put together a rescue plan for the Llanwern steel carbon plant near Newport. The plant employs approximately 3,000 people in South Wales and is considered the most vulnerable to closure of the Corus operations under the restructuring plans.
An announcement on restructuring plans is expected by Corus Group chairman Sir Brian Moffat in the next few weeks.
The climate change levy is due to be introduced in April 2002 and will tax companies that supply electricity, natural gas, petroleum, coal, lignite, and various forms of coke to various UK industries. It will be calculated on the number of energy units produced and, unlike VAT, will not be refundable.
On Monday, the Engineering Employers’ Federation claimed, the proposal would damage the competitiveness of UK firms and prevent them from becoming energy efficient. Earlier this month, the director-general of the CBI Digby Jones, claimed the tax would be anti-productive and impossible to implement.
Links
EEF says climate tax will harm UK plc
CBI support for government wavers