The UK risks seeing its manufacturing sector fall behind rival economies if the government does not offer certainty over policies on shifting to green energy, according to the head of FTSE 100 packaging maker DS Smith.
Miles Roberts, the company’s chief executive, said British government decarbonisation policy has lacked the clarity of European rivals, meaning DS Smith has moved ahead with a €90m (£78m) investment in a paper mill in Rouen, northern France, while waiting for more clarity from government before investing in upgrades in the UK.
The EU’s Green Deal and the US Inflation Reduction Act have offered enormous subsidies to help industries to reduce their own carbon emissions as well as to manufacture the technology needed for the transition away from fossil fuels.
“We’re saying to the UK, we’re here. What’s your plan?” said Roberts. “It would be very helpful to understand what’s happening in the UK that’s mirroring the EU. We’ve taken back control, so where is that control? How are we making Britain an attractive place to invest?”
He said without a national plan, businesses would look elsewhere to make investments.
DS Smith, which traces its history back to east London in the 1940s, makes and recycles cardboard for millions of packages a year. It collects used boxes from shops and supermarkets every day around the country, which it then pulps to make new ones. It has benefited from the boom in online deliveries by the likes of Amazon.
Roberts said: “If you are committed to carbon neutral and it is far more attractive to invest in those solutions elsewhere, what you’ll see is manufacturing decline in the UK.”
“What we’re seeing from the US and EU are some considerable incentives, financial support for us to invest in these sorts of solutions. Ourselves and a lot of other companies are starting to take advantage of these things.”
DS Smith is investing in its Rouen paper mill to install biomass burners to replace old coal-fired boilers and provide 80% of its large energy needs. The boilers will start operating in the first quarter of 2025.
Paper making is among the most energy-intensive industries. Waste paper or wood is pulped with water, then pressed between giant rollers, then dried. That means paper companies are highly sensitive to changes in government energy policy. In the UK energy costs are close to double comparable costs in the EU, Roberts said.
DS Smith said the biomass furnaces at Rouen would run on waste wood from households, packaging and furniture from industry and saw mills, as well as the waste from the paper-making process at the mill itself. It will not use wood or pellets made directly from forests.
Roberts said that the French authorities had offered long-term certainty. The local authority committed to provide 85,000 tonnes of waste wood a year, gave “a lot of certainty over the price”, and granted a biomass licence that will last for decades. He also highlighted a “more consistent collection system” for waste, compared with the fragmented approach in the UK led by more than 200 individual councils.
DS Smith has a similar paper mill to Rouen in Kemsley, Kent, which is the largest in the UK and the second largest in Europe. Kemsley, which opened in 1924 to make newsprint, received an EU subsidy for replacing gas-fired boilers with waste to energy plant, but it will have to replace them within the next 10 years as it tries to reduce emissions.
The environmental sustainability of biomass boilers is controversial among experts, as fuel creates carbon dioxide when it is burnt as well as other pollutants. However, the carbon in biomass originated from the atmosphere, so it can be considered carbon neutral over its full life cycle, and DS Smith argues that it uses material that might otherwise end up in landfill.
He added that if the UK misses out on investments now because of policy uncertainty, the effects can be apparent for a long time afterwards.
“These assets take years [to develop],” Roberts said. “When people move they don’t come back easily.”
