Turning out the lights on Britain’s economy

17 06 2010

It has often been said that England’s reserve goalkeeper David James is older than the Chancellor of the Exchequer. But the problem was never one of age. The problem was one of expertise. The problem is that England’s reserve goalkeeper quite possibly knows more about economics than George Osborne.

Further evidence came today – although it was left to the government’s reserve Chief Secretary to the Treasury, Danny Alexander, to deliver it. Still displaying absolutely no understanding of the need for economic growth to help the economic recovery, the government has axed 12 major projects worth £2bn, and suspended another 12, worth £8.5bn.

The most notable victim of this spending review (focused on spending decisions made by the last government after January 1st) is the £80m loan to Sheffield Forgemasters to help the company develop key heavy components for nuclear power plants. It is hard to describe how short-sighted this decision is.

Nuclear power has its sceptics, both around the environment and its huge cost. There are valid questions that can be asked about how the government goes about the development of new nuclear power stations in this country – although it’s hard to see how Britain can maintain its power supply without nuclear. Rule out nuclear power, and there’s a good chance the lights will go off.

But what is unarguable is that globally, demand for nuclear power is rapidly increasing and completely outstripping supply – nations from the United States to the United Arab Emirates are rushing to build nuclear plants.

There are a limited number of factories around the world that can manufacture the heavy forgings necessary for new nuclear power stations. Mostly, they are in the Far East, where manufacturing is taken seriously. The demand for heavy forgings is forecast to triple by 2020 to 70,000 tons, with global supply capacity only expected to reach 59,000 tons in that period. Lead times, while shortening, are still long. In short, it’s a potential money-spinner.

Sheffield Forgemasters was not relying solely on government funding to upgrade its facilities – nuclear reactor manufacturer Westinghouse and Lloyds were reportedly also funding the move. But, unless replacement private finance can be found at a time when many potential funders are short of cash, the opportunity to put Britain at the centre of the global nuclear supply chain will be lost.

Nick Clegg said today that the Forgemasters loan was a “breathtakingly cynical” pre-election stunt to get Sheffield votes. Maybe it was. But it was also a necessary – and overdue – move to help develop Britain’s manufacturing capacity, in an age when it can no longer rely on such false prophets as property and finance. It was a chance to start rebuilding Britain’s economic model.

Today the government turned out the lights on that chance.

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18 06 2010
Daily Cuts Briefing – Friday 18th June « A Thousand Cuts

[…] The highest profile casualty of the cuts was the £80m loan to Sheffield Forgemasters to enable it to become a world-class manufacturer of key heavy forgings for new nuclear power plants. More analysis of this decision here. […]

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