UK's coal output falls to pre-industrial levels

Economics Editor,Sean O'Grady
Saturday 12 January 2008 01:00

Coal production in Britain has fallen to its lowest level since the industrial revolution, according to data from the Office for National Statistics.

The ONS's index of production showed that the coal industry recorded its worst ever reading in October, at 42.9 (with 2003 representing the base index level of 100). Annual production is set to fall below 15 million tonnes, a level last seen 200 years ago. Production peaked in 1913 at 287 million tons. The ONS said that UK electricity generators have been turning to coal as the price of natural gas has climbed even more steeply, but that demand has been met by imports from Russia, Australia and elsewhere. Foreign coal accounts for two thirds of UK consumption.

Some special factors adversely affected UK output late in the year, including a fatality and changeovers of coalfaces within pits. Even so, that 2007 will see a 10 per cent fall in output compared with 2006, at a time when coal prices have almost doubled, speaks volumes for the parlous state of the industry, which comprises a mere five deep pits.

However, the increase in the price of coal does seem to be helping the industry to a slightly brighter future, with production at the Hatfield colliery in Yorkshire restarting after a £100m investment by Richard Budge, the former chief of UK Coal, and Russian investors.

Coal's woes were reflected in the wider economy. Industry as a whole saw a 0.1 per cent fall in output in the three months to November, over the previous quarter. There was a significant fall in output in electrical and electronic goods, rather than the usual seasonal boost.

Paul Dales of Capital Economics commented: "We do not think it will be long until the manufacturing sector enters a recession, contributing to a weakening in overall economic activity this year rather than offsetting it."

The OECD yesterday predicted a "moderate downturn" in Britain's economy.

Manufacturers will, however, be helped in due course by a renewed weakening in the value of sterling. During trading yesterday, the euro, with a hawkish European Central Bank dashing hopes of rate cuts in the eurozone, rose to a fresh record high against the pound, at one point reaching 75.86p. Sterling dipped below $1.95 to a 10-month low against the dollar.

Libor rates for the dollar and the euro fell again, but those for sterling jumped. Three-month sterling rates rose almost five basis points to 5.68 per cent, attributed by analysts to the Bank of England's failure to deliver a rate cut on Thursday.

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