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By Suzanna Kerridge, 30 March 2001 17:00

NEWS All UK businesses will feel the squeeze of the levy, but the electronics industry will be hardest hit. The brainchild of Chancellor Gordon Brown, the tax has been devised to encourage companies to be more energy efficient and to control the emissions of the heaviest energy consumers. Some businesses could find themselves having to fork out as much as an extra £400,000 per year as energy bills rise by an average of 10 per cent. Discounts of up to 80 per cent are on offer for companies that use environmentally friendly energy sources such as wind or wave power, and those which are classified as intensive energy users, such a steel plants, will also enjoy a rebate. But the Pollution Control Law does not regard electronics manufacturers as 'energy intensive' and as a result, some may be forced out of the country by these huge bill hikes. The tax has been widely criticised, and comes at a time when the technology sector is struggling to cope with the cost of introducing EU regulation - not to mention job cuts and falling share prices. An estimated 2,300 companies will have to fork out an extra £100m a year between them, despite reductions in National Insurance Contributions aimed at offsetting the cost, according to a report from consultancy firm Ernst & Young. Helen Woolston, environmental affairs manager at the Engineering Employers Federation, said: "With the downturn in the economy, this levy could hardly come at a worse time." She condemned the levy, claiming it will do little more than increase companies' energy bills and damage international competitiveness. "In some cases it could be the final straw," she said. "Electronics manufacturers are already operating under tight margins with rising costs because of EU legislation such as the waste electronic equipment directive and now this. It might force companies to pull out of Britain. It could be the final rock in the rucksack." Richard Watson, an indirect tax partner at PwC, agreed, claiming electronic companies would be especially hard hit. "They are not energy intensive enough to qualify for a rebate but nor do they employ enough staff to benefit from the National Insurance reduction," he said. The Institute of Directors (IoD) accused the government of betraying British business, claiming it will keep new investors away. "It is more likely to make organisations think twice about coming to the UK. Unless every country adopts this levy then the direct effect will be that the same emissions will be pumped out, just in another country," said Richard Baron, deputy head of the policy unit at the IoD. The scheme is expected to raise around £1bn in its first year. National Insurance Contributions will be reduced by only 0.3 per cent.