Heat pump policy threatens British manufacturing success

Whitehall bureaucrats have been accused of hating British manufacturing industry by a leading trade association Chief Executive.

Mike Foster, CEO of Energy and Utilities Alliance (EUA), pointed to the ironically named Government publication “A market-based mechanism for low-carbon heat”, published on Wednesday as evidence of officials putting the interests of foreign manufacturers ahead of home-grown industry.

Mr Foster takes aim at the so-called “market mechanism” that proposes fining British gas boiler manufacturers if they don’t sell a Whitehall dictated number of alternatives such as heat pumps. Four British manufacturing companies make ninety per cent of the 1.7 million boilers sold in the UK, but 70 per cent of heat pumps sold in the UK are imported.

Commenting on the proposals, Mr Foster said:

“I can’t recall an industrial policy that is so anti-free market as the one Whitehall is now proposing. It has been confirmed that officials will tell industry how many products they need to sell to avoid a fine, regardless of what the consumer actually wants. Penalties of £5000 for every product failing to meet the imposed target have been suggested. A British manufacturer failing to meet their target by 10,000 units risks facing a whopping £50 million penalty.

I am shocked that a Conservative Minister, Lord Callanan, supports these Soviet-style production quotas for British industry, which take no account of the most basic laws of economics. Without demand, firms cannot sell products. And the PM himself has acknowledged that heat pumps are too expensive at “ten grand a pop”. Yet they are both willing to penalise successful British manufacturers for not selling their quota.

British-based boiler manufacturers have told Ministers they will simply import heat pumps, rather than make them, as it is cheaper to do so if they are faced with these penalties. This will avoid the fine but make redundant British workers. The UK will lose tax revenue, see benefit costs increase, all because Ministers don’t understand economics or value British manufacturing.

History teaches us that these centrally imposed quotas will fail but the cost will be paid by British manufacturing workers and the world-class businesses that employ them. The British gas boiler industry has responded to the challenge of net zero, and developed award winning zero-carbon gas boilers, for the very government department, BEIS, that now wants to penalise them if they don’t sell the alternative to these innovative boilers. It’s just bizarre.

Even the Heat Pump Association has warned that the so-called ‘market-mechanism’ will simply encourage a flood of cheap imported appliances, of poor quality, just to meet these centrally-imposed targets.

Lord Callanan recently visited a leading British boiler manufacturer and was told of the consequences of this policy, but has chosen not to listen. He heard that if consumers want a heat pump, industry would supply them. That’s how markets work. That’s the basic economic law that Conservative Ministers used to understand. Now they listen to Brussels-funded lobbyists who advocate heat pumps, knowing they are built in China or Europe and then imported into the UK. That wasn’t written on the side of a red bus during the Brexit referendum.

If Ministers knowingly prefer to see imported heat pumps sold at the expense of British-built boilers, then every worker in the UK’s once formidable manufacturing industry will ask, ‘why does Whitehall hate us?’”