A new front has opened up in the post-Brexit tensions between Boris Johnson and the EU over Brussels’ concerns that the British wind turbine industry is being favoured for government contracts worth billions of pounds.
With the support of the governments of France and Spain, the European Commission has privately warned UK officials that the government’s procurement policy could be in breach of the trade deal signed on Christmas Eve.
The clash highlights the difficult line that the government is trying to tread in promising to support British companies in the post-Brexit era while fulfilling its commitment to being open to investment from around the world, including Europe.
The issue also joins a long list of points of tension in the EU-UK relationship since the UK left the single market and customs union, including disputes over the post-Brexit arrangements for Northern Ireland and the issue of licences in fishing waters, which led to Royal Navy patrol boats being deployed to Jersey earlier this year.
The business secretary, Kwasi Kwarteng, is preparing to sign off on hugely valuable renewable energy contracts in the coming months as the government seeks to fulfil the prime minister’s promise that offshore windfarms will generate enough electricity to power every home in the UK within a decade.
It is understood the EU is alarmed by the government’s public backing of an industry target of 60% of supply chains using UK-manufactured goods or domestically supplied services, and a revised questionnaire for those bidding for contracts.
Two questions in the questionnaire require contract applicants to “anticipate, with supporting evidence, the level of UK content in their project and level of the local job creation”. But the EU-UK trade and cooperation agreement explicitly prohibits any requirement for companies to “achieve a given level or percentage of domestic content”.
About 50% of the industry supply chain is currently serviced by UK firms but leading EU-based companies have a big interest in the market, including the Spanish firm Siemens Gamesa and the French energy company Total. Seven of the largest windfarms in the world are in UK territory and it is an increasingly fruitful market for international energy suppliers.
The government is preparing to offer a new round of so-called contracts for difference, which offer cash top-ups to companies investing in renewable energy projects to insulate them from any dips in the wholesale market price for energy. A round of similar contracts launched in 2014 offered financial support worth £9.7bn.
Madrid and Paris instructed the commission to raise the subject of the new contract processes with British officials at a recent meeting.
According to diplomatic sources, UK officials confirmed that details on local content use were included in the questionnaire but said they had not yet decided what weight they would give to the responses of companies when awarding contracts.
“The commission expressed its concerns about compliance with the trade and cooperation agreement and the UK’s WTO commitments,” a diplomatic source said. It is understood that the commission also raised the subject of future UK subsidies for the British wind turbine industry. A commission spokesperson said officials were assessing the UK government’s policy.
Sam Lowe, a senior research fellow at the Centre for European Reform thinktank, and a former member of the Department for International Trade’s strategic trade advisory group, said: “Local content requirements are prohibited not just under the EU-UK trade and cooperation agreement, but also the UK’s WTO commitments.
“So the question that needs answering is whether the UK is in fact giving companies with UK supply chains preferential access to contracts, or just information-gathering. The latter is fine, the former less so.”
The Department for Business, Energy and Industrial Strategy said the success of applications for UK contracts would not depend on commitments by companies over the use of local labour and services.
It said: “We are committed to supporting the UK renewables industry wherever possible, and building sustainable supply chains for low-carbon electricity, capable of delivering the offshore wind sector deal’s industry commitment of 60% UK content in its facilities. However, in accordance with the UK-EU trade agreement, there are no mandatory requirements for supply chains to use UK products, or any other type of mandatory targets.”
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