Welcome to this meeting of the Scottish Affairs Committee, at which we are going to be speaking with representatives of the wood panelling industry in Scotland about the challenges and opportunities for the sector. We are very much looking forward to the session. Welcome, Mr Kerr and Mr Wilson. Before I ask the witnesses to briefly introduce themselves, does anyone have any declarations of interest?

That is fine. Thank you.

I am a forestry owner in Ayrshire, and I have had a long‑term involvement in forestry for 20 years.

I sit on the APPG with Lillian, but I would also like to declare that I attended a business event that both of the witnesses were at, which was celebrating a business occasion.

Thank you very much. We will get under way now. Could I ask you both to briefly introduce yourselves?

Good morning. I am Alastair Kerr, and I am the director general of the Wood Panel Industries Federation.

I am Brian Wilson. I am not unfamiliar with this place from a past history. Probably as a sequel to that, I was asked at one point to chair a working group on the wood panel industry, which produced a report that demonstrated its importance for all the reasons we will come on to. I have maintained an interest in it since, and I occasionally act as an adviser to the Wood Panel Industries Federation.

Thank you both very much. Mr Kerr, could I direct my first question to you, please? Can you give us an idea of the role the wood panelling industry plays in Scotland’s economy?

The industry in the UK as a whole is five manufacturing sites operated by three overseas-owned businesses: one Canadian, and two Austrian private family businesses. Of those five sites, there are three in Scotland. They collectively supply just over half of the production to the market. The industry supplies two thirds of the UK’s consumption of these products, and there are three products: chipboard, medium density fibreboard and oriented strand board. There is no plywood made in the United Kingdom. Scotland is, if you like, the powerhouse; 60% of the raw material for the industry is coming from Scotland and 56% of the industry’s production is in Scotland. It is not an equal share. For example, 35% of chipboard is made in Scotland, 34% of MDF, but 100% of oriented strand board. It is the only oriented strand board plant currently in the United Kingdom. In Scotland, 3,810 people are employed. That is made up of about 1,000 full-time equivalent jobs and 2,810 full-time equivalent jobs. As for financial benefits, the total GVA of the sector is £1,092 million, and of that £417 million is derived from Scottish businesses, £457 million from England and £297 million from Wales. The majority of production is in Scotland; the majority of the market is in England.

If two thirds of the production happens in the UK, or two thirds of the products used in the UK are produced in the UK, where does the other third come from?

Of these three product types, the vast majority would be from Europe—western Europe in the main. There is a small amount of imports from the rest of the world, but even into Europe, the rest of the world accounts for only 5% of imports into the European Union. For plywood, 100% is imported.

Are most of the jobs in rural areas of Scotland?

Yes. I should explain that there has been a panel industry in the United Kingdom since 1898. The world’s first commercial wood-based panel plant was in, would you believe, Sunbury-on-Thames. It started in 1898 under the brand name Sundeala, which you might be familiar with. It is no longer there. The modern industry as we know it really began in 1970, and that is when in Scotland the North American owners purchased the plant. They built the OSB plant in the 1980s and since then have shown a track record of investment. That first OSB plant that was built has now been completely replaced by a state-of-the-art facility. All the companies have a track record of continued investment within the areas in which they operate. Obviously, the draw, apart from the UK being a good market, is the raw material and the location to forestry.

Where are the three companies in Scotland located?

There is one in Ayrshire at Auchinleck. That just makes chipboard and does a lot of value adding for the furniture industry. There is Cowie at Stirling—chipboard and MDF—and OSB is just outside Inverness at Morayhill.

Are these well-paid jobs by local standards?

I recognise that total employment numbers, relative to some other industries, are not huge, but they are all skilled and semi-skilled jobs, electrical and mechanical engineering positions. To retain those jobs, the industry pays above the average. The average salary is about £47,000, thereabouts, which is certainly higher than the average.

You have good jobs. Do you have apprenticeships coming through the sites as well?

Apprenticeships are really important for the industry, because these are skilled and semi-skilled jobs. They are not jobs that you can just open up and expect to get and retain people. All the companies operate apprenticeship programmes, and about 5% of the workforce come through apprenticeship programmes.

Would you mind following up with a list of the number of apprenticeships for each of those three employers, please?

Yes, of course.

Thank you, Mr Kerr.

Given the scale of the sector in Scotland, why are so many of the supply chains located in England?

Close to their market, I guess. The industry is producing about 3.5 million cubic metres of product, and it is ubiquitous across the economy. The industry goes largely unseen because it is a business-to-business industry. From a consumer point of view, you tend not to directly see them. Of course, the products are invariably covered, but they are everywhere through building, furniture and retail—the list goes on. I will give an example: Howdens. The kitchen furniture and bedroom furniture market is estimated to be worth about £12 billion. Howdens is probably one of the biggest players in that space. It is a £2 billion business employing about 10,000 people across the country. It tends to be located relatively close to its main markets, and the south of England, of course, is a big draw for a lot of this. We tend not to think too much about the caravan and static van industry, another billion-pound business employing about 10,000 people around Humberside. A lot of the big processors and customers of the industry tend to be located in England, although not exclusively. I do not have any specific names, but there will be businesses in Scotland as well, of course.

Would you say that there could be more opportunity to create a supply chain in Scotland?

Yes, of course. It is always about the market. We absolutely see growth potential for our industry. A lot of it will centre around building, and around house building in particular. There is a relationship between house building and furniture, of course. At least 80% of Scotland’s house building is timber-framed, and I have seen numbers close to 90%. In England, it is about 12%. However, there is real expertise in Scotland that can benefit from a growing market in England. We see the market for timber-framed housing increasing because timber frame, in cost terms, is not necessarily any cheaper, but it can be built faster. There are savings to be made from building houses faster. If that market grows, there are definitely opportunities for the wider forest-based industries located in Scotland. We see that there is underutilised capacity at the plant in Inverness, and that plant could certainly double in the longer term.

Mr Kerr, what steps are there for the Scottish manufacturing plants to become more environmentally sustainable?

The sustainability criteria for the industry tend to be dictated at group level through the parent businesses, but all of them are centred on stewardship of the raw material and natural resources, and on caring for people and their communities. The North American company is signed up to the SBTi sustainability objectives. Starting with the product, the product is already carbon neutral by virtue of its wood content. From cradle to first customer, the products are carbon negative. All the businesses are now working on scope 3 emissions, which are the transport and downstream emissions. The plant in Inverness is just completing a rail siding at the moment. There is another rail siding at a member down in Wales that takes timber from Ayrshire in Scotland. It has a rail siding to move timber. I think I am correct in saying that the rail connection at Inverness will take away about 22,000 lorry movements per annum, which is significant. From a factory point of view, achieving net zero will be a challenge. There are two energy inputs: the heat element and the electricity element. The heat element is now almost exclusively biomass. It is not 100% of the time, but that is an area where the gap is definitely narrowing. Electricity, to a large extent, is dependent on Government policy and the roll-out of grid connectivity. The plant at Inverness is already at net zero. All the heat comes from biomass, and all its electricity comes from renewable sources, from wind farms in Scotland. The ones in Cowie and Ayrshire are at different stages, but they are all working towards achieving net zero. Some will get there a bit faster than others.

What challenges do you think are preventing the industry from reaching its target of an 88% reduction in carbon emissions by 2050? Is that something you are quite confident it will get to?

The biggest challenge will be the Government policy meeting its targets. If that is achieved, it will still get to net zero, but it may have to use offsetting to achieve it. A lot of this is dictated by location, and things such as carbon capture and underground storage, we will have to see how that develops. It is about the connectivity of the manufacturing sites to an access point where you could remove excess emissions. If you are not near an access point, if carbon capture and storage is not a possibility and if you cannot get 100% renewable electricity from the grid, a site may have to look at introducing a combined heat and power plant. Of course, these are very large, long-term capital investments. From where I sit, I have no doubt that the industry will achieve net zero, probably ahead of time, and I would say it is making good progress.

How do you ensure that the raw material, the timber that you are bringing in, is sourced from verified suppliers with sustainability standards?

There are two sources of wood raw material. There is virgin material, which is all being sourced from domestic sources—from UK, predominantly Scottish, forestry. Within that virgin material, there is sawdust and chips, which are derived as a product of the sawmilling industry. It is still virgin material; it is just a smaller fraction of it. A significant proportion of reclaimed waste wood is also used, but waste wood is exclusively used in chipboard production. From the virgin materials, sustainability starts with material coming from forests that have been certified as meeting the UK forestry standard. All the companies have third-party certification through the FSC—the Forest Stewardship Council—and the PEFC. We can give assurance that all the material is sustainably and legally sourced as well, because EU and UK timber regulation requires you to provide assurance that your material is legally sourced, but the UK is a relatively safe country anyway in that regard.

Mr Kerr, I would have thought the environmental impact is not so much the energy use as the formaldehyde resin that binds it together. It is 10% of the volume and is pretty toxic stuff, isn’t it?

Chemicals can be toxic. Formaldehyde can be toxic, but there are safe limits of exposure. Formaldehyde is probably one of the most researched chemicals on the planet. I have been involved with the Wood Panel Industries Federation for 30 years, and concerns about formaldehyde predate my time with the federation. It is certainly true that if you go back 30 years, the level of exposure when measured against today’s standards would be high and would give rise to concern. However, over that period of time, through technical development and regulatory pressure, the concentrations of free formaldehyde coming from products, including products made in our industry—and that has changed—are now known to be safe. We know this through the EU REACH process, which we were really bound up in at one point, but we are still tied to it. Formaldehyde was one of those chemicals that went through the REACH process and a restriction process whereby the level of exposure is now known not to give rise to any health impact. It has taken a long time, and although formaldehyde is still used in resins—and there is a good reason for that, which I will not necessarily go into—there are alternatives that exist. They cannot completely replace the formaldehyde. If formaldehyde resins could be completely replaced, the industry would replace them, but every chemical has an issue at some point within its chain, including in manufacture—obviously, the thing that we take very seriously is that no harm should come from the products that we sell.

Was there a point about emissions specifically, Mr MacDonald?

It is not emissions but environmental impact, I think.

Are you content with that, then?

Yes.

We will go on to your substantive question.

Brian Wilson, I have a few questions for you. Clearly, we are planting a lot less than we should be to keep up. I do not think there is any issue at the moment with supply because of that bulge of 1970s planting. Are you concerned on behalf of the industry about supply levels in Scotland to be able to sustain our wood panelling industry in, say, 10 years’ time?

Absolutely. That is one of the key issues, and you do not have to look very far ahead to see the potential consequences. Peak wood will, for the reason you stated, be reached in the early 2030s. Therefore, if you are looking for a sustainable industry in that meaning of sustainable, you have to be planting more trees. It is really as simple as that. You have to be planting the right productive trees in order to meet the needs of the industry. It is a pretty straight trade-off. Demand is going to grow if house-building targets are met, and for all the other reasons that demand will grow for wood products. In the medium term, the consequence of that is more imports. For the parts of the country that we are both familiar with, it just makes no sense whatsoever to be importing wood from other parts of Europe in greater quantities, or from Brazil or anywhere other than actually growing it ourselves. If you look a little further down the timeline, the rationale for these plants being where they are is that they were built close to forestry developments. If you have increasing dependence on imports and reducing supply from our indigenous industry, the rationale for these plants, or for investment in these plants, begins to diminish accordingly. Therefore, everything comes back to the raw material and the straightforward common sense of growing more trees and making sure they are used in productive forestry.

Alastair, you may know the answer better than Mr Wilson, but is it cheaper for us to use Scottish wood or to import it?

It is not viable, other than occasional marginal volumes, to import wood to make wood-based panels, because 50% of the wood is water. You are paying a lot to transport a lot of water, which you subsequently have to drive off. Being located relatively close to your raw material base is definitely cheaper. If it were not, these plants would not be here. They would be in Europe or elsewhere.

Is there anything that your industry can do to impact the Government, to increase production or to help assist in the planting of timber?

One of the challenges is that the needs of this industry are spread across various Departments. It is a manufacturing industry, but it is wholly dependent on a rural and agricultural product. There is then the environmental element of what trees you grow and what priority is given to various species. So you have environment, you have rural affairs, you have your manufacturing, you have trade. It is across various Departments and the challenge for this industry is to ensure that they are working together and that these various strands of policy are brought together in order to give recognition and support to the importance of this industry.

Forestry Commission Scotland emphasises planting hardwood. I feel that is more dominant than the commercial impetus to plant timber that can be used commercially. I do not know if you have any feedback on that.

You are correct. Since the 1990s, when the remit of the Forestry Commission changed away from rebuilding a strategic resource after the second world war to more social and environmental benefits, and that has grown since. Those imperatives seem to be driving planting policy. As well as seeing a reduction in the amount of productive species—we would like to see any new planting be at least 60% productive, and we are seeing a decline in that—we are also seeing replanting not keeping pace, and sites that could be replanted are perhaps now being rewilded, so we are losing ground. We are not foresters, per se, although there are foresters within the industry. We are a downstream user, a customer of the forestry sector. Our demand is for productive species. A role that we have taken on is to try to create awareness of that for the long term—I think the 50-year forestry forecasts were supposed to be out before Christmas, but they are now going to be early in the new year. They will give a better indication as to what the long-term availability will be. The concern of the industry is not today. There is enough wood today to satisfy our industry and, indeed, other wood-using industries. However, there are new users just around the corner. We saw the quite significant increase in demand when the power sector moved into biomass. Around the corner is aviation fuels and whatever. We know from quite large international studies that the demand for wood fibre is only going to increase globally. We work within a globally traded commodity business, and we cannot import the material we need—just to raise a concern. We do not want to see the pendulum drift too far away from the productive side, because it is important for the longevity of our industry and, indeed, other wood processors.

I think that is a critical point. There are other voices and other interests, perfectly respectable interests, that promote non-productive forestry, and there is no negativity towards that. However, the voice of productive forestry also has to be heard rather than the two being put in conflict with one another. The point cannot be made too strongly that this very successful, very important industry is entirely dependent on productive forestry, and therefore a shift in the other direction has implications that may not be the intention of the promoters of that change in balance but is certainly the outcome.

About 50% of forestry is now in private hands, but the role of the state in this space is extremely important. The immediate effect of the budget cuts in Scotland did have an impact. Fifty per cent of that budget cut has now been reinstated, which is a step in the right direction, but we would obviously like to see it reinstated back to where it was. Like any industry, we would want more, but we accept that you need sufficient financial input if Government are to achieve their targets. The long-term effect of a continuing decline in availability is really in investment. The owners of these businesses have a track record of investing and making substantial capital investment to grow their businesses, but if there is a question mark about future wood availability and, of course, if a market becomes constrained, the price increases. It is a hugely competitive market, so a few pence can make the difference between a sale or a loss when you are dealing at the commodity end. Of course, our members also produce quite a wide variety of value-added variants, which changes things. Ultimately, it is about investment. We need to have a secure raw material supply if we are going to maintain the level of investment. Sorry, I missed the second part of your question.

It is the same. In terms of jobs, I would not see a tremendous impact on our members’ businesses. Of course, it could have an impact on the supply chain, but there are positions within these factories that just have to be filled regardless. Ultimately, if long-term investment ceases and you do not get growth, it will eventually start eroding and impacting job numbers.

These drivers, the strategies, are ambitions for increasing timber demand. Of course, as a nation, we import 80% of our timber. We are the world’s second largest importer of wood behind China, and that is not a badge of honour, of course. Sorry, I have lost my thread.

We would like to see all Governments of the United Kingdom working to achieve the targets they have set. If there is a strong commitment to getting back to achieving those targets, I think there is a real possibility that future demand could be met. Of course, you could meet your targets through increasing broadleaf production. I am not against, and our industry is not against, broadleaf, but we do not use broadleaf. We use productive softwood species. Hence making a commitment to increase productive planting would give a strong signal to the industry that they recognise productive species as a strategic resource that is important, particularly in Scotland, for manufacturing and wood-processing industries.

Any planting is spread over time and age ranges. It is not the case that we will just plant a whole block of forestry here and, when it is mature, cut it down and just replant it. When one area is harvested, there will be other trees growing behind. We do not see a complete cliff edge. We know that forest yields, because of the reduction in planting over the last 20 years or so, are forecast to drop off. There has been smoothing of a drop-off, but there is still going to be a drop-off. That does not mean to say the wood is not available. The wood will be there, but it will be in shorter supply, which will impact costs. The industry, of course, has increased its intake of waste wood over the years, specifically in chipboard production. Certainly in the medium term, I think we see that there would be sufficient wood for the industry. However, if it is coming under pressure and pushes up the costs, that has a direct impact on the cost of the product and how competitive you are in this global marketplace.

Before I go any further, I never declared my interest as a supporter of the APPG for the wood panel industry. Mr Kerr, how do you respond to the proposals from environmental organisations to reform commercial forestry subsidies to promote the rewilding of Scotland’s woodlands?

To be honest, it is not a space that we are heavily involved in because we are a downstream user. I do recognise, though, that there are many competing interests for land, and for the use of that land. I am no expert in forestry and the availability of land for planting. We know the current areas, but there are upland areas where planting could be done. There is still work to be done to win the argument, and we should not be in conflict with other users and demands for the industry. Unfortunately, we find ourselves to be in some conflict as a forestry sector. I think there is still a job to be done to communicate why it is important and, as a user, it is easier for us to express why it is important for our industry. The wider forest industries, of course, are engaged more deeply in that particular debate.

I think the fact that question even exists implies a negativity towards commercial forestry, which is, in my view, completely irrational. In my view, forestry was one of Scotland’s great industries, one of its great success stories. We planted trees and provided jobs in rural communities. It provided the feedstock for other industries, a total success story. Why anyone should think it a good idea to rewild areas that have contributed so much to the country’s needs is puzzling. They would then have to answer the question: if the trees and the timber are not going to come from the areas that have traditionally been forestry areas, where is it going to come from? Is it better that we import 90% of our wood rather than 80%? The whole thing is bonkers. Within a generation we have gone from it being a virtue for land to be productive to it now supposedly being a virtue to pay people to make it unproductive. If you extend that into forestry, it just takes that irrationality a step further.

That brings me to my second question. How does the industry balance biodiversity with the need for stable timber supply?

The figure Alastair and the industry have put on it, of 60% productive forestry, does not seem unreasonable, but that is why the case has to be stated, and where this Committee can be helpful in stating the case. A voice has to be given to the productive side of forestry, rather than it almost being denigrated as a rather unfortunate piece of history that we should eliminate if possible. We need more of it; we do not need less of it. If it can be in the traditional forestry areas, extending them and using some of the huge areas of utterly unused land at present, so much the better. Commercial forestry is a good thing, and we should be bold in saying so.

The forestry grant scheme in Scotland last year was cut by 41%, a £32 million cut. We have a dichotomy where the Scottish Government effectively have to fund the planting of trees, but it is UK businesses, the house builders, that are likely to benefit from it. Do you see what I mean? Yes, we have jobs in the highlands, but that industry is basically going to be exporting our panel boards to England to a significant extent. Do you think the Westminster Government should have a role in supporting the Scottish forestry market?

Yes. As an industry body, we would like to see everyone joined up on this. We totally understand devolution and why it came about, but from an industry point of view it does create stickiness, for want of a better word, and there is overlap in policy. Should Westminster be playing a role? Yes. I am not best placed to say what that role should be, but absolutely. Although the regulatory management of the resources is devolved, as you rightly say, the market is across the country. As businesses, we do not recognise borders. You work within the market space.

Is the tree-planting taskforce a pan-Government commercial organisation, or is it just a commercial organisation?

As I understand it, it is a pan-Government taskforce. However, I would reiterate that we are not a forestry organisation, so we are not on the frontline of forestry policy.

Mr Kerr, when you say pan-Government, do you mean pan-Scottish Government or between Governments?

It is cross-ministerial, across the nations.

That is helpful. Thank you.

I am interested in knowing what role recycling plays and how it affects the pressure on raw timber supply.

For the waste wood market in the United Kingdom, the best estimate is that between 4.5 million and 5 million tonnes of post-consumer waste wood becomes available on the market in any given year. It is a relatively constrained volume. It goes up and down relative to economic activity. It is possibly a little bit less than 4.5 million tonnes at the moment, and it can go a little higher, but certainly it has never been higher than 5 million tonnes. These are best estimates from industry and people within that space. Our sector requires about 1 million tonnes. Last year it was a little less, but it has been more. We say that, on average, about 1 million tonnes of waste wood go into particle board or chipboard. Although it forms about a third of the total raw material inputs to the industry in the UK, in chipboard on average it is 75% of the input material, so it is as important as virgin material to our sector. It has increased in importance since the rise of the packaging waste regulations in the early 2020s. Before the packaging waste regulations, the industry took, on best estimates, about 100,000 tonnes per annum, but it has gradually grown. It is about 1 million green tonnes today. Across Europe, demand for reclaimed waste wood is increasing. We even expect our industry’s demand will increase. It is a very important raw material. There are other users of it, and there are threats to it that give us some concern.

Are you saying that the security of that supply is under threat at the moment?

Yes. Before the renewables obligation, the wood panel industry was the largest consumer of waste wood. Today we are not the largest consumer. We are still the largest recycler of waste wood, but not the largest consumer. The largest consumer is energy. With the volumes that are available in the market, the market has been able to accommodate all users today. However, because it is a relatively constrained market, if you introduce new users into it, that will inevitably start to create tightness in the market and potentially displacement. If you had another industry of the scale of the energy industry, which went from zero to 3 million tonnes in about 10 years, that will displace existing users. The displacement comes because the Government subsidy can give a benefit to a sector and creates unintended consequences, of course. That is what happened with the power sector. We see there is growing interest in sustainable aviation fuels in this country, in both England and I believe in Grangemouth, and potentially there might be one in south Wales or somewhere. For the moment there is only really one significant project being actively discussed, and that is in Teesside, and they are talking about 1.5 million tonnes of biomass with a substantial quantity coming from waste wood. Where is that waste wood going to come from? I think the problem with sustainable aviation fuels is that the SAF mandate currently stipulates that feedstock materials must be waste that cannot be prevented, reused or recycled. That is terrific. We want that to be maintained, but it is not clear how this will actually be enforced. Just putting a requirement on meeting sustainability criteria does not act as a barrier. We are not opposed to SAF or, indeed, to power generation. It has always been about the Government support. We do not want to see a new industry come and grow at the expense of our industry. It is about trying to find a happy balance, which in the case of SAF, the definitions have to be made at a global level and not just domestically. Government should maintain adherence to the waste hierarchy, but we would certainly like to see some measures introduced to enforce the adherence to the SAF mandate. That means putting tests in place to demonstrate that any waste feedstock that is used is definitely waste that was not being utilised or did not have another viable use. A lot of this material may well be imported. We do not know, which is the problem. All we can do is raise it, because we have seen what happened with renewable power. SAF is another threat, and potentially a greater threat because of the different economics that drive that industry, which could mean that it does not actually need Government support.

As a wee bit of historical context, I was around when we included biomass within the renewables obligation. The theory at that time, going back 20 years now, was that there would be great expanses of coppice willow growing all over the town. It sounded wonderful that that was how biomass was going to be provided. Of course, the reality is that it is an awful lot easier to use what is there already than to grow coppice willow all over the place, so that is what they did. Therefore, when I first became involved in this, the conflict that arose was the use of a scarce resource. Suddenly there was this new kid on the block that was being heavily subsidised through the renewables obligation and was eating into the available supply. At that time, the phrase that we developed was that it was a hierarchy of uses. We have nothing—nothing within limitations—against biomass, but not at the expense of an existing industry. Therefore, the hierarchy of uses was that the first claim on the finite supply should be for the wood panel industry. We are back in the same situation again. By all means, sustainable aviation fuel is a good move, but the temptation will be for it not to develop its own sources of supply, but to compete for those that exist already. If that is subsidised in some way, it is to the disadvantage of what already exists.

Is there an advantage to recycling and reusing by using it in the wood panel industry as well? If it is in 75% of chipboard, that chipboard becomes recycled and can go back into that cycle of wood panel.

Ninety per cent of the product of our industry can be recycled. Like any recycling operation, you lose some material every time it comes around, and you have to add some virgin material back into it, but a kitchen could potentially be recycled five or six times back into chipboard. Recycled material works well in chipboard. These products will almost certainly be laminated, and increasingly the market is demanding and calling for recycled material. We see legislation coming along, particularly in construction materials, requiring a certain percentage of recycled content within building materials. We feel we are ahead of the game; we know how to manage and deal with the material. Our issue is that it is a finite resource, and we will always be constrained by that.

Can I slightly challenge you on that? I had a recycling company, quite a major one, called Specialist Waste Recycling, which was bought by Biffa, and we very expressly did not recycle MDF because of the resin that I mentioned before.

Yes, MDF creates problems when recycling it back into MDF. It is not that it cannot be recycled; technically it can be recycled. It tends to be avoided because it clumps together and creates issues. That position is changing. I admit that it is still in its infancy, but there are now technologies available at scale to enable the recycling of MDF back into MDF. That is not the only application. I think a better use would be looking for higher value-added applications, because you are taking a commodity product that is quite energy intensive and trying to recycle it, and that process will take up energy. To put it back into a commodity product does not always add up. There are other value-added markets out there; insulation is one. As the pressure is put on virgin materials, on fibre generally, these technologies will grow.

I understand that. You just said that 80% could be recycled, and I am asking whether you should reconsider that figure of 80%.

The 80% figure comes from the total production. Of course, there isn’t equal production of MDF. There are 850,000 cubic metres of MDF produced in the UK. That figure is not a UK figure but a European figure, so across all production it is an accurate figure. I accept the point that the amount of MDF that is currently recycled is quite low. I reiterate that the position is changing as more global demand is put on wood fibre. Recycling things that are currently difficult to recycle will definitely increase.

I am not sure I can answer that in detail, but I can offer an opinion. One of the problems is that we do not understand the SAF industry in detail. A parallel is coal conversion in this country, where the only coal converter that turned to biomass was Drax. The threat at the time was that its demands would be so massive that it could potentially consume every stick of wood in the country. The reality, of course, was different. It was totally unfeasible for them to pick up bits and bobs of wood across the nations to ship over to Selby when their infrastructure was geared around rail and sea. The location of SAF plants near to ports—if the Teesside development and, say, Grangemouth come to pass, there are other feedstock types that they would have access to. However, this is an open question. I have no idea how much. I read statements from the development companies that specifically talk about forest products, sawmill products and waste, so we can only see it as a potential threat. Globally, SAF development will be a huge thing, I have no doubts about that, and the demands globally on these raw materials will increase.

Demand for wood panel products is likely to increase in the UK, primarily due to its use in construction, particularly house building. The UK Government have set an ambitious target to build 1.5 million new homes in this Parliament. How prepared is the industry to meet the predicted increase in demand for wood panels in house construction?

We are ready today to meet the demands of UK house construction. We would like to see timber frame increase in England because there are speed-of-build benefits, and carbon benefits in the increased amount of carbon retained within the building. It also comes with an opportunity to provide very high insulation standards, so there are definitely benefits. We know that every major house builder now has a timber-frame offering. Why it is not growing as much as it should, there are many debates on that. From our industry’s point of view, could we meet the demand if we saw a significant increase in timber frame? Well, the major use is in sheathing a timber frame—the main panel that provides support for the frame. The plant at Inverness was specifically designed to meet a higher demand than it is currently providing, so its capacity could be doubled quite easily and quite quickly to meet any increase in demand. Whether another oriented strand board line would be built in Scotland, for example, it potentially could be if there is sufficient wood available. We know that planning permissions are already being granted in Wales. They are just waiting for environmental approval for another oriented strand board line at a member’s factory in Wales, which would also increase the availability of material for timber-frame construction, the same with chipboard used in flooring and, of course, the fitted furniture elements of a house. There is capacity in our industry to meet increasing demand.

Why is that the case if the UK sector meets only 65% of current market demand?

We are only constrained by wood availability. If there is certainty of supply, the investment to increase capacity would follow it. I do not think that any industry ever supplies 100% of demand, and there are a variety of economic reasons for that. We can certainly increase and would have a desire to increase and to grow the market share of our members’ products in this country.

Does that investment to meet new capacity involve new technology, or is it simply the case that the technology we have at the moment is sufficient but there is a lack of wood supply?

These products, at their core, are relatively simple, and any new capacity would be grown from established technologies. In mature markets, most new investment tends to go in value adding and things like that. On increasing the capacity, there is always some underutilised capacity within the manufacturing business anyway, so you can deal with any immediate increase in demand. For example, coming out of covid there was a high demand for products and the industry increased capacity to meet that increasing demand. We are not reliant on developing new technology to increase the capacity. If the market is there and the wood is available, the capacity will increase. That has been the history of the industry from the 1970s. It has always striven to increase and grow its capacity within a market.

On a related point, as Mr McAllister rightly says, the house-building infrastructure is a huge part of the Government’s strategy. If you look at the industrial strategy, which has been published, the wood panel industry does not feature in it, yet the wood panel industry is absolutely critical to the delivery of some of the Government’s other goals. It would be good to see it get that recognition as a foundational manufacturing industry. We were talking about this earlier, and we notice that bathroom ceramics get a mention, which is absolutely fine, but most of us spend more time in our kitchens and our living rooms than we do in the bathroom. Every kitchen, every living room and every bedroom in the country is full of wood panel products, as well as a large percentage of houses being built from them. There is an obvious read across from the house building and infrastructure targets to the industrial strategy. Maybe the Committee could consider giving some support to the claim of the wood panel industry to be given that recognition in the Government’s industrial strategy.

That is interesting, because we have heard evidence already as a Committee on what is and is not in our industrial strategy, so I appreciate your answer, Mr Wilson.

Mr Kerr, are there any problems with recruiting and retaining staff in the industry?

Locally, yes. Because we are dealing with skilled and semi-skilled operators in the main, bringing in new people is a problem. Like many others, there is a risk of seeing an ageing workforce. The people who are there are extremely committed to the factories as their places of work, which is great. Increasingly, companies are investing in apprenticeship and young graduate schemes and trying to encourage women into the workplace. This is large-scale manufacturing, and these plants run 24/7. They are located in what may be considered by some to be out-of-the-way places, not near the shops or the bright lights. We have seen, in Ayrshire and elsewhere, the draw of some of the newer industries in the wind sector and others that also have the capability to pay good wages but do not require, for example, night-time working, shift working and things like that, so younger people can get drawn away from the industry. You can offer what would be seen to be good wages, but there is a point where you cannot continue to increase your wage bill. So it does lend itself to working harder on trying to bring young people into the industry. The industry holds open days and so on to try to make it more understood, and to show younger people that there is progression through the industry. It is a battle, but we are not alone in that. We lose people to other industries, and we gain people from other industries. It is a constant battle.

Are you aware of any skills shortages?

Not that I have any detail on. The two major skills are in electrical and mechanical engineering. Engineers are the problem. Taking a school leaver is not an easy thing for this industry. They have to be trained up, so it is quite a long period to take a school leaver through into an apprenticeship scheme, and it would be a three-year apprenticeship. It is an area in which all the companies put a significant priority on attracting women into the workplace. It is not just a “nice to do”, it is an “essential to do”. It is an industry that has tended to be male-dominated, a bit like the forestry industry generally. That is changing slowly, and companies are spending more and putting more effort into trying to create the awareness that these are good jobs for women and men alike. Slowly, slowly things are changing, but we cannot rest on our laurels on this one.

How is the low domestic supply of wood impacting the UK and Scottish Government’s house-building targets?

The forestry sector, and particularly the sawmilling sector—most wood will be from the sawmilling sector—want to increase their share of the market. You are fighting against an enormous amount of imported material; softwood will significantly be coming from Scandinavia. The low planting targets—we are not alone. We are a wood user; the sawmilling industry is a wood user/supplier, wood processor/supplier, of material. We all want to see that the targets are met because we all share the same view that, in the late 2030s and early 2040s, we will see forest yields starting to drop off. That is not good if, at the same time, you are trying to see your demand for timber increase. There is a timber strategy, of course, and we want to increase the amount of timber in construction, not least for environmental gain because of the stored carbon benefits that it brings. If you see planting stagnate or decline—you cannot look at any given year because they will go up and down, but the trend pattern should be one of increase. Unfortunately, the trend pattern over the last 20 years has been at least stagnation, if not decline. That definitely has to be something that is reversed, otherwise it will impact growth. Even the sawmilling industry. Why should it invest in new capacity for sawmilling if it will struggle to get the material at a cost that is affordable for it?

Is there a risk of builders using less environmentally friendly materials to meet the demands of the wood panelling market?

Interestingly, panels, for their applications, are not easily substitutable. A builder can decide whether he wants to build a brick-and-block house or a timber-frame house with brickwork on the outside, which tends to be the norm in the UK, so timber could lose out. There is a huge opportunity from an increase in timber-frame construction in building. From a panel side, they are not easily substitutable. Fifty per cent of panels produced are going into furniture, and there is no real alternative to wood panels used in furniture, because we could not go back to solid furniture. In the days when this place was built, oak was aplenty, but not today. Panels grew after the second world war, when there was mass-market demand for affordable material. Panels were able to take lower-grade raw materials and give much better material utilisation. That is how the industry grew, and there is no real alternative to that today. However, there are alternatives for people in choosing how they will build their houses. There are environmental benefits, particularly, coming from the use of wood and wood products in building. Certainly if the market can be grown, the UK forestry, sawmilling and processing industries, of which a significant part are based in Scotland, would benefit from that, so we would encourage the growth of that sector.

The most obvious alternative is between domestic production and imports. Every part of the argument points towards domestic production and sustaining a successful manufacturing industry in this country. It is a case of joining up the parts in order to ensure that happens.

We need to encourage both Governments to up targets.

Exactly.

It is one of recognition. We know all the great things we do, and we know all the great numbers and so on. In UK plc, we get lost, and we have touched on some of the reasons for that, business to business, and so on. I have no doubt that our members’ materials will still be used in the development of the so-called IS8 growth sectors. I have no doubt that they will be used, because there is no alternative. What will desks be made out of? Will you sit at a concrete desk on a glass or plastic chair? No. So our members’ products will still be used. I pulled off the list of manufacturing foundational industries, which was last updated on 24 November. All the usual suspects are in there—ceramic household and ornamental article manufacturers are there, as are sanitary fixture and refractory product manufacturers. Where is the manufacturer of furniture? Where is the manufacturer of wood and wood-based products? Since man emerged from the cave, timber has been a constructional material. I know full well that nuclear is one of these growth industries. You will not build a nuclear reactor building out of timber, but there is a whole host of supporting buildings that will consume wood and wood-based products. It might be seen to be a petty point, saying that we are not included in the list, but it is not. It is not petty. It speaks to the wider problem of recognition. The message that we would like the Committee to take forward is about getting inclusion. I appreciate that the industrial strategy is a developing document, so these lists will grow. The foundational industries list has been updated, and there is a materials section within that—manufacture of glass, refractory products, clay, porcelain, cement, lime, plaster and concrete articles. Where was timber? Where were wood and wood-based products? It is a fundamental building material, yet it is not there because it was not recognised. Maybe it is not understood, I do not know.

Yes, that is a basic problem, and it is reflected in the name, which is a discussion I have heard many times, that the wood panel industry is not the most exciting title. Ever since I have been a wee bit involved in it, that is the paradox. It is such an important industry with such a low profile, for some of the reasons that Alastair has explained. It is not forestry, it is not construction, but it is an intermediate stage that is crucial to the working of the economy. There is a statistic there that 10% of the economy is tied to the wood panel industry. There is a big gap between public perception of the wood panel industry and that statistic, and somehow that has to be bridged to get the recognition that is required. I am sure the federation appreciates the Committee according it that status. It is an important, fundamental industry within the economy, and it is a great success story. Let’s do what we can, not just to protect but to enhance it. Part of that is recognition, and recognition of the consequences if its fairly modest request for support and encouragement is not listened to.

We import the majority of our timber from overseas. America has its tariffs, and Canada is now selling a significant percentage of its timber outside America. What do you think is the macro position of timber? Do you think—I know the answer has to be yes—that we should mitigate the risk of over-reliance on imports?

Yes, 100%. I find that figure staggering. The one thing that we are not short of is land. Why more of it could not be devoted to forestry is a bit of a mystery to me. By forestry, I particularly mean productive forestry to reduce import dependency on the raw material, and not to encourage import dependency on the finished product. The two are interlinked. Again, you come back to somebody having to make the case for productive forestry, because there are plenty of people making the other case. The biggest threat is that the value of an industry that has a proud history, particularly in Scotland, is understated, and we see something slip away that has been very precious and will continue to be very necessary.

I know there is a lot of supply. Do you think that, at the moment, there is dumping of forestry products in the UK from Canada or the Baltic nations?

One thing that we know for sure is that trade flows are being challenged at the moment, largely because of the United States tariff policy. It can only be measured over a longer period of time to see what the significant change in trade flows actually is. One thing that it has done—we import 100% of our plywood, and that is fair enough because we do not make it here. In Europe, the EU found against some Chinese manufacturers and is investigating some Brazilian suppliers of plywood products. It found against some Chinese suppliers for dumping and, in 2024, imposed an anti-dumping tariff of about 62.5% on certain commodity codes. The effect of the trade disturbances is depressed global markets, including in China, which is experiencing growth of only 5%—if only. That is a significant drop. Other Asian markets are also being challenged, partly because of the decline of the Chinese market. These producing countries will inevitably be looking for alternative outlets. The EU having imposed anti-dumping duties will act as a significant discouragement for trying to dump materials. At the same time, almost a year later, a temporary duty suspension was introduced for the same plywood commodity codes in this country, thereby rendering those products 6% cheaper. I do not have the evidence to say that more materials will be dumped, because dumping is a very specific thing. Proving dumping is challenging, and you need data over a prolonged period of time. What we are starting to see is import volumes from some of these countries increase. Whether it is being dumped, I do not know, and I would not like to say, but it is certainly something that we will be looking at.

Mr Wilson, we know the 6% tariff has been removed, which we know is a concern for the industry. Has there been any obvious impact of those removals so far?

I do not think so. I think it is more a concern than—

We have only started to measure it since the beginning of the year, because that is when the temporary duty suspension was introduced. I am told that the potential impact, particularly on the Scottish OSB business, could amount to about £7.5 million per annum. That is a direct cost. Plywood is our particular concern, and of course there are other timber products that will be of concern to others. From the plywood point of view, if that comes in and it is 6% cheaper, there will definitely be increased competition issues, particularly for OSB, because there is direct competition. There is some competition with chipboard and MDF, but to a lesser degree, and I cannot quantify what that is. Oriented strand board is a clear example, and it is a Scottish business. Financially, it will have an impact.

Could it lead to a decline in investment or even companies moving elsewhere?

This is another problem that has a cost to it. It is the same as reduced wood availability, it has a cost to it. Increased energy prices. Everything has a cost, and it all eats into competitiveness and creates uncertainty. It is those things that investors will question. These businesses are owned by large international groups—Canadian, North American, a huge sawmilling business and oriented strand board business, two Austrian businesses, global businesses, plants from China through to North and South America. They have a lot of choice as to where they place their investment. They have shown a commitment to the UK because it is a good market. We must not forget that aspect. It is a good market, but the more constraints placed on it, they will say, “Will we get a better return if we go elsewhere?” I question why there was a temporary duty suspension anyway, but it is another thing that adds to it, and it erodes confidence—that is what it does.

I think one thing you could say, greatly to the credit of this industry, is that it does not dramatise problems or make threats to pull out. On the contrary, it continues to invest. That should be an even stronger reason why it is listened to as a voice of reason and not of alarm on an issue like this.

The answer is in what I have just said, that they have to be listened to, taken seriously and addressed. An explanation of the initial action would be helpful, but then to recognise that it does come at a potential cost.

We do not know who raised the request for a temporary duty suspension. It is a two-year suspension. I recognise that there are commercial reasons for not necessarily disclosing that, and I totally understand that. What is less clear to me is why we should not find out what their rationale was for making the request. We found out belatedly from the Department why it arrived at the decision it did, and it saw that we do not make plywood here, so it did not see that there is a particular problem. It is a personal opinion, but I do not believe it considered the impact on other products, competing products, non-plywood products, in that decision, because it ultimately said that there was no meaningful harm. What is meaningful harm? Is £7.5 million lost off the bottom line of a Scottish business not meaningful? What we see with the duty suspension is that, whoever requested it, the company’s business is predicated on import. By granting this, it has made the product it imports, which competes with products we make here, 6% cheaper. These are commodity products in which pence make a difference. We struggle with the rationale in arriving at that decision, particularly when there was no problem importing plywood. It is all imported anyway. There was never a problem with importing it. All this was doing was making it 6% cheaper, potentially to the detriment of another industry. There are some questions that should be asked about that.

Clearly the policymakers did not have the benefit of the information and experience that you have been able to relay to us today. Thank you both very much for your evidence. We have found it most interesting and informative. I will now close this session.