Tata Steel has warned that Britain's failure to provide sufficient mitigation measures for electricity costs is placing them at a material disadvantage in that country, compared to European mainland plants.

It has joined other members of Britain's energy-intensive industry in criticising the high electricity prices they pay compared to countries such as Germany, France and the Netherlands ahead of Britain's Budget Statement on March 21.

“Our competitors are sitting right on the other side of the Channel and this regime gives them a material competitive advantage,” Mr Karl-Ulrich Koehler, head of Tata Steel's European operations, told the Financial Times in an interview on Friday. This situation, he warned, could have serious consequences over time. “It erodes positions,” he said.

Comparative tariffs

Tata Steel estimates that electricity prices in Britain for the energy intensive industry are currently up to 50 per cent above those in France, and 25 to 30 per cent above those in Germany or the Netherlands.

Mr Koehler estimated that the policies added an additional £5 a tonne in terms of cost for the group to produce in Britain than it did on the mainland Europe. “For us to achieve the same amount of savings we would have to cut about 2,000 jobs.”

Mitigation package

While Britain's Chancellor of the Exchequer, Mr George Osborne, announced a £250 million mitigation package for the energy-intensive industry in the pre budget report late last year (in recognition of the additional costs born as a consequence of Britain's introduction of the world's first carbon floor price) it won't be implemented till 2013, and is yet to provide the level of measures the industry are looking for.

The Energy Intensive Users Group warned last year that Britain's policy would make it an “increasingly unattractive place to site manufacturing businesses.”

In November, Rio Tinto closed an aluminium smelter in Lynemouth, in northern Britain citing significantly increasing energy costs.

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