The government will receive another boost to its green manufacturing momentum this week when Siemens of Germany announces plans to create hundreds of jobs in Britain and invest more than £75m in a new wind turbine plant.
The move comes despite claims made today by the EEF, the manufacturers’ organisation, that the UK tax system is still stacked against manufacturing and needs a shake-up if the economy is to become less geared towards financial services.
The Siemens factory has particular significance because it shows Britain can beat off competition from Denmark and Germany to house a plant capable of making a new generation of extra-large blades.
The facility will demonstrate, too, that Britain can be at the centre of the German manufacturer’s worldwide wind ambitions, because Siemens already has a wind power training centre in Newcastle upon Tyne and a global centre for offshore grid connections in Manchester. It is also sponsoring significant research work into renewables at Sheffield and Keele universities.
Siemens declined to comment ahead of an announcement but well placed sources said that a deal had been struck at the highest possible level of government for the company to locate a facility in Britain, probably on the east coast of England.
The decision comes after months of talks – including meetings at 10 Downing Street with the Siemens president, Peter Löscher – and is believed to have been finalised as a result of an important change in the budget last week, which brought public grants for ports to build green manufacturing hubs around them.
The Siemens facility is expected to create 700 direct jobs and perhaps as many as 1,500 more in the supply chain. The plans will be announced only days after GE, the American conglomerate, announced a similar initiative in Britain, with investment of £100m, creating 2,000 jobs.
Mitsubishi of Japan and Clipper Windpower of the US have also announced schemes to make bigger and better blades that could bring down the cost of producing wind offshore.
Big utilities such as E.ON and RWE have won acreage under the Round Three (R3) licensing scheme to develop wind farms many miles off the coast of Britain. But some have warned that the economics remain fragile, given the deep water levels and other factors involved, unless development costs can be driven down.
Alistair Darling announced £60m worth of grants in the budget to develop onshore manufacturing around dock areas, as well as a plan to create a green investment bank that would be capable of taking equity stakes in R3 schemes.
Some of these financial incentives seem to have been enough to persuade Siemens to build in Britain, going some way towards repairing the damage done by Vestas’ decision to close the UK’s only functioning wind turbine factory last summer in the Isle of Wight. There has also been dismay that 90% of the supply contracts for Britain’s biggest offshore wind farm, the London Array, went abroad, many of them to Siemens in Germany and Denmark.
The British wind power industry has estimated that eventually 70,000 green-collar jobs could be created on the back of more than £100bn of private sector investment needed under R3 proposals.
But the report out today from the EEF, entitled “Tax reform for a balanced economy”, says that for UK manufacturing to succeed in the future, a range of reforms to the system of investment allowances will be needed. The engineering sector also wants a cut in corporation tax, an increase in VAT and a return of the top rate of income tax to 40p.
The EEF warns that failure to tackle the tax system will stop the economy from being rebalanced away from the City and encourage companies to move overseas.
“While there have been some helpful changes to the tax regime in recent years, we still lack a coherent tax system that encourages manufacturers to invest and sends the signal that they should be doing it here,” the EEF’s director of policy, Steve Radley, said.
“The next government must think and act differently. In particular, it can achieve much larger benefits from any new measures if its approach is more predictable and transparent.”