Fears that energy-intensive industries could be hit by government climate-change policies were heightened on Wednesday after Rio Tinto Alcan said it would close its Northumberland aluminum smelter, with the loss of more than 500 jobs.
The loss of these relatively well-paid industrial jobs is a blow for northeast England, the United Kingdom's highest unemployment region.
Rio Tinto blamed rising energy costs. "It is clear the smelter is no longer a sustainable business because its energy costs are increasing significantly, due largely to emerging legislation," said Jacynthe Côté, chief executive officer.
The mining group, which last month announced plans to divest an estimated $8-billion of aluminum assets globally to cut costs, says its Lynemouth smelter is currently "just profitable" but from 2013 faces annual costs of £56-million ($90-million) and rising to comply with European and U.K. carbon legislation.
Roger Salomone, energy adviser to the Engineering Employers Federation, said: "There's a real concern here that unless we rethink climate change policy we could be facing further job losses." He said the government's promised package to help energy-intensive industries – which the sector is anxious to see in the chancellor's autumn statement on Nov. 29 – should offer "material measures."
Ian Lavery, Labour MP for Wansbeck, said the news was devastating. He said the ruling coalition had for months talked of a package of measures but had not acted quickly enough, allowing Rio Tinto "off the hook."
"It's a combination of government, green taxes and a multinational company with no commitment to an area like Lynemouth," he said.
The site is the biggest private sector employer in southeast Northumberland, where the percentage of working-age people in parts of Wansbeck and Blyth claiming out-of-work benefits is nearing 40 per cent.
The government, said Mr. Lavery, has "got to make its mind up" about its stance on environmental legislation or risk tens of thousands of job losses.
The Lynemouth complex, opened in 1972, comprises the smelter and a power station. Rio Tinto has obtained planning permission to convert the power station, which employs 111 people, from coal to biomass. It hopes it can remain in operation under a new owner.
But it says the smelter faces worst-case costs, from 2013 onward, of £46-million, owing to the European emissions trading scheme, plus the cost of the U.K.'s carbon price support mechanism of £10-million in 2013 and rising.
John McCabe, the site's corporate affairs director, said environmental costs were "a big part but not all of it" in the decision. Other factors included labour and raw materials. Potential purchasers of the smelter had, he said, reached the same conclusion. "It can't be operated sustainably in the future."
Vince Cable, the business secretary, said all affected would have access to the best support and training available. The government was supporting northeast businesses through the Regional Growth Fund.
Britain's Department of Energy and Climate Change said: "This is disappointing news, but the cost of energy is an issue for businesses, not just in the U.K., but across Europe, too. The overwhelming prime factor influencing the energy costs faced by businesses is the global wholesale price of fossil fuels."