1999 report by Business Strategies on impact of Climate Change Levy on UK economy. News -

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Climate Change Levy - Impact on the UK Economy

Business Strategies Ltd in July 1999 published a report showing that the proposed Climate Change Levy, together with the associated reduction in employers' National Insurance contributions, would in the long run destroy 156,000 jobs. Following is the text of their press release. The full report can be downloaded.

CLIMATE CHANGE LEVY WILL COST MORE THAN 156,000 JOBS IN THE UK

The Climate Change Levy, which the government proposes to introduce in 2001, will cost 156,000 jobs over the next 10 years, according to the latest estimates. These estimates are contained in a report^* from the economic consultancy Business Strategies, to be published tomorrow (Friday), which demonstrates that the impact of the levy will spread far beyond energy intensive users.

Since the levy is being introduced at a much higher rate than in other countries and is structured in a way disadvantageous to manufacturing, it will reduce the attractiveness of the UK as a manufacturing base. Over the long term we are likely to see investment go abroad rather than to the UK.

Melanie Lansbury, Managing Economist and co-author of the report, explains: "For UK Plc this inevitably means lower capacity through both lower capital investment and the loss of technical progress embodied in that investment. This will seriously weaken UK competitiveness and will lead to job losses throughout the UK, not only in manufacturing but in services too."

Neil Blake, Research Director adds: "As well as job losses, this levy will hit productivity and skill levels in the UK. One effect of the tax is to reduce high skilled/high value-added jobs and increase low skilled/low value-added jobs. This seems to run counter to the government’s aim."

Other key findings are:

Given the regional distribution of industry, the levy will further widen the North-South divide.
UK GDP is expected to be reduced by £11bn over the next 10 years
The UK trading position is set to weaken further as competitiveness is hit.
UK productivity is expected to fall by 0.8 per cent

The research looked not only at the direct effects of the new energy tax, the cost of which is to be matched by an equivalent cut in employers’ National Insurance Contributions, but also the secondary effects. Since firms buy services and products from a wide range of different industries the impact of the levy will have a ripple effect throughout the whole economy. Consequently, many services will also be hit.

Not surprisingly, manufacturing will bear the brunt of the job losses, in particular the Chemicals, Metals and Engineering sectors. The largest number of job losses in these sectors are expected in fabricated metal products (17,000 jobs) and machinery & equipment (13,000 jobs).

The region expected to suffer the most is the West Midlands with a loss of over 19,000 jobs, nearly 1 per cent of employment. Other regions expected to be disproportionately hit are the East Midlands, Wales, the North East and Yorkshire & the Humber. Here job losses will account for 0.8 per cent of employment. However, all regions will be adversely affected.

The Climate Change Levy - Impact on the UK Economy, available from Business Strategies, 192 Vauxhall Bridge Road, London SW1V 1DX. Press enquiries to Melanie Lansbury or Neil Blake (020 7630 5959).

This report was sponsored by the UK Steel Association, the Engineering Employers Federation and the Chemical Industries Association

Impact of Climate Change Levy

Industry	Employment		Value Added		Productivity
	Number of jobs	%	£mn	%	%
Agriculture	-3286	-1.2	-171	-1.2	-0.1
Forestry	119	0.8	-6	-1.5	-2.3
Fishing	-36	-0.6	-4	-0.7	-0.2
Coal	-5598	-65.5	-987	-65.6	-0.2
Ext. of Oil & Gas	-350	-1.4	-264	-1.5	-0.1
Mining of Metal Ores	-49	-12.1	-6	-38.9	-26.8
Other Mining	-1398	-4.3	-71	-3.9	0.4
Food & Beverages	-4116	-1	-288	-1.4	-0.4
Tobacco	-1225	-4	-81	-4.3	-0.3
Textiles	-3010	-2	-116	-2.3	-0.3
Clothing	-1706	-1.4	-54	-1.7	-0.3
Leather & Footwear	-22	-0.1	-4	-0.3	-0.2
Wood	-2932	-3.9	-96	-4.1	-0.2
Pulp & Paper	-5715	-5.5	-320	-5.7	-0.2
Publishing & Printing	-490	-0.1	-59	-0.4	-0.2
Fuel Refining	-975	-3.8	-156	-4.1	-0.3
Chemicals	-5590	-2.7	-565	-2.9	-0.2
Rubber & Plastics	-6203	-2.7	-247	-2.9	-0.2
Other Non-Metalic Mineral Prods.	-6018	-4.9	-322	-5.1	-0.2
Basic Metals	-9197	-9.1	-527	-9.3	-0.2
Fabricated Metal Products	-14149	-3.8	-508	-4	-0.2
Machinery & equipment	-13308	-3.8	-620	-4	-0.2
Office Machinery	-127	-0.3	-18	-0.5	-0.2
Electrical Machinery	-1963	-1.2	-86	-1.4	-0.2
Communications Equipment	-1143	-0.9	-68	-1.1	-0.2
Instrument Engineering	-170	-0.1	-17	-0.3	-0.2
Motor Vehicles	-2302	-1.1	-139	-1.3	-0.2
Other Transport Equipment	-5073	-3.3	-210	-3.5	-0.2
Other manufacturing	-1430	-0.7	-66	-1.1	-0.4
Gas & Electricity	-2267	-2.4	-483	-3	-0.5
Water	-684	-1.8	-73	-2.1	-0.4
Construction	5179	0.5	-77	-0.2	-0.7
Sale & Repair of Vehicles	112	0	-175	-1	-1.1
Wholesaling	-7359	-0.7	-584	-1.6	-0.9
Retailing	1657	0.1	-113	-0.3	-0.4
Hotels & catering	2030	0.2	-119	-0.5	-0.7
Land Transport	-4020	-0.9	-471	-2.3	-1.4
Water Transport	156	0.9	-11	-0.5	-1.3
Air Transport	31	0	-7	-0.1	-0.2
Supporting Services	-1435	-0.4	-226	-1.5	-1.1
Communications	-2496	-0.5	-245	-1.1	-0.5
Banking	-8112	-1.4	-568	-1.7	-0.3
Insurance	-935	-0.4	-99	-0.7	-0.3
Auxilliary Services	-536	-0.2	-45	-0.9	-0.6
Real Estate	-5171	-1.6	-308	-1.9	-0.3
Renting of Moveables	-2738	-2.1	-165	-2.4	-0.4
Comuter Activities	-3151	-0.7	-140	-1.4	-0.6
R&D	-1485	-1.7	-86	-2.5	-0.8
Other Business Act.	-28312	-1.1	-831	-1.6	-0.5
Public Admin. & Defence	1305	0.1	2	0	-0.1
Education	-2209	-0.1	-115	-0.3	-0.2
Health	915	0	-37	-0.1	-0.1
Sewage	-635	-0.8	-54	-1.2	-0.4
Welfare & cultural	2495	0.3	-98	-0.4	-0.7
Other Services	-1051	-0.5	-24	-0.6	-0.1
Domestic Services	0	0	-10	-0.3	-0.3

Total	-156175	-0.7	-11430	-1.5	-0.8