Shale gas could frack up our manufacturing

Fracking won't help our industrial base, if the Dutch disease is anything to go by.

Among the many extravagant claims made by supporters of fracking, perhaps the most absurd is that it will lead to a renaissance in British manufacturing. George Osborne picked up this theme last week when he argued that cheap energy was leading manufacturers to return to the US and he wanted to see this happen in Britain. A revival in the fortunes of our hard-pressed industrial regions would be warmly welcome, but sadly fracking will not deliver this. Even if all the major obstacles to extracting large amounts of UK shale gas could be overcome, our manufacturers are unlikely to benefit from much cheaper gas. To make matters worse, they could even suffer a big loss of competitiveness, as they did in the late 1970s when the discovery of North Sea oil pushed up the value of the pound.

The obstacles to major shale gas production in the UK are well known. To start with there are uncertainties about the geology. The estimate of UK shale gas reserves in the north of England was recently revised up substantially to 1300 trillion cubic feet and it is often suggested, based on US experience, that it might be feasible to extract 10 per cent of these reserves. Yet given that there are differences in the geology between the US and UK, no-one really knows whether it will be economically viable to extract anything like this volume of gas.

Even if the economics of extraction turned out to be viable, there are a multitude of environmental concerns and substantial political opposition. Unlike the US, where fracking can take place in the wilderness, we live in a crowded island. Developing our shale gas reserves will inevitably bring substantial local and national opposition that will make it much harder for the industry to take off in a big way.

But as many commentators have already pointed out, even if these substantial obstacles could be overcome, it may not mean cheap gas for our manufacturers. Unlike the US which has little capacity to export its newly found gas reserves, the UK is heavily integrated into the European energy market and our gas prices are set at the European level. Extra gas production from UK shale gas is unlikely to be large enough to lead to major reductions in European gas prices.

But what has been overlooked is that the discovery of a natural resource should lead to an appreciation of the exchange rate, which makes the manufacturing sector less competitive. The most celebrated example of this happened in the Netherlands after the discovery of a large gas field in 1959 which led to the term the “Dutch disease”.

There is also an example closer to home when the UK made the discovery of North Sea oil in the 1970s and sterling became a "petro-currency". Interestingly, if the claims of proponents of fracking are to be believed, the scale of shale gas reserves in the UK could be of a similar magnitude to the discovery of North Sea oil. If 10 per cent of the estimated northern shale gas reserves were accessible, this would be equivalent to around 3250 million tonnes of oil which is almost exactly the same as UK offshore oil production since 1975.

And the precedents from when the UK discovered it had large offshore oil reserves in the 1970s are hardly encouraging. Despite an almost perpetual economic crisis, the real effective exchange rate of sterling rose by nearly 30 per cent in the six years after the first North Sea oil was landed in 1975. Over this period gross output of UK manufacturing fell by over 22 per cent and unemployment rose sharply.

That’s not to say that no-one benefits from exploiting natural resources. The companies extracting shale gas could take on more workers and may generate higher profits for their owners. There may also be additional tax revenues for the government if they are not squandered on excessive tax breaks to stimulate the industry in the first place. But the beneficiaries will not include UK manufacturers. Even if one ignores all the practical, political and environmental obstacles to exploiting our shale gas, the argument that it will lead to a renaissance in UK manufacturing does not stack up. It is unlikely to significantly reduce our energy prices and is more likely to push up sterling and erode the competitive position of our manufacturing firms.

"Frack off, u motherfracker". Photograph: Getty Images
Photo: Getty
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Michael Carrick is the “Geordie Pirlo” that England misunderstood

The Manchester United legend’s retirement announcement should leave Three Lions fans wondering what if?

That it came in the months leading up to a World Cup arguably added an exclamation point to the announcement of Michael Carrick’s impending retirement. The Manchester United midfielder, who is expected to take up a coaching role with the club afterwards, will hang up his boots at the end of the season. And United boss Jose Mourinho’s keenness to keep Carrick at Old Trafford in some capacity only serves to emphasise how highly he rates the 36-year-old.

But Carrick’s curtain call in May will be caveated by one striking anomaly on an otherwise imperious CV: his international career. Although at club level Carrick has excelled – winning every top tier honour a player based in England possibly can – he looks set to retire with just 34 caps for his country, and just one of those was earned at a major tournament.

This, in part, is down to the quality of competition he has faced. Indeed, much of the conversation around England’s midfield in the early to mid-noughties centred on finding a system that could accommodate both box-to-box dynamos Steven Gerrard and Frank Lampard.

As time went on, however, focus shifted towards trequartistas, advanced playmakers and those with more mobile, harrying playing styles. And the likes of Jack Wilshere, Ross Barkley, Jordan Henderson and Dele Alli were brought into the frame more frequently than Carrick, whose deep-lying capabilities were not utilised to their full potential. That nearly 65 per cent of Carrick’s England caps have come in friendlies shows how undervalued he was. 

In fairness, Carrick does not embody similar characteristics to many of his England midfield contemporaries, including a laudable lack of ego. He is not blessed with lung-busting pace, nor is he enough of a ball-winner to shield a back four solo. Yet his passing and distribution satisfy world-class criteria, with a range only matched, as far as England internationals go, by his former United team-mate Paul Scholes, who was also misused when playing for his country.

Rather, the player Carrick resembles most isn’t English at all; it’s Andrea Pirlo, minus the free-kicks. When comparisons between the mild-mannered Geordie and Italian football’s coolest customer first emerged, they were dismissed in some quarters as hyperbole. Yet watching Carrick confirm his retirement plans this week, perfectly bearded and reflecting on a trophy-laden 12-year spell at one of world football’s grandest institutions, the parallels have become harder to deny.

Michael Carrick at a press event ahead of Manchester United's Champions League game this week. Photo: Getty.

Where other players would have been shown the door much sooner, both Pirlo and Carrick’s efficient style of play – built on patience, possession and precision – gifted them twilights as impressive as many others’ peaks. That at 36, Carrick is still playing for a team in the top two of the top division in English football, rather than in lower-league or moneyed foreign obscurity, speaks volumes. At the same age, Pirlo started for Juventus in the Champions League final of 2015.

It is ill health, not a decline in ability, which is finally bringing Carrick’s career to a close. After saying he “felt strange” during the second-half of United’s 4-1 win over Burton Albion earlier this season, he had a cardiac ablation procedure to treat an irregular heart rhythm. He has since been limited to just three more appearances this term, of which United won two. 

And just how key to United’s success Carrick has been since his £18m signing from Tottenham in 2006 cannot be overstated. He was United’s sole signing that summer, yielding only modest excitement, and there were some Red Devils fans displeased with then manager Sir Alex Ferguson’s decision to assign Carrick the number 16 jersey previously worn by departed captain Roy Keane. Less than a year later, though, United won their first league title in four years. The following season, United won the league and Champions League double, with Carrick playing 49 times across all competitions.

Failing to regularly deploy Carrick in his favoured role – one that is nominally defensive in its position at the base of midfield, but also creative in providing through-balls to the players ahead – must be considered one of the most criminal oversights of successive England managers’ tenures. Unfortunately, Carrick’s heart condition means that current boss Gareth Southgate is unlikely to be able to make amends this summer.

By pressing space, rather than players, Carrick compensates for his lack of speed by marking passing channels and intercepting. He is forever watching the game around him and his unwillingness to commit passes prematurely and lose possession is as valuable an asset as when he does spot an opening.

Ultimately, while Carrick can have few regrets about his illustrious career, England fans and management alike can have plenty. Via West Ham, Spurs and United, the Wallsend-born émigré has earned his billing as one of the most gifted midfielders of his generation, but he’d never let on.

Rohan Banerjee is a Special Projects Writer at the New Statesman. He co-hosts the No Country For Brown Men podcast.