Politics

UK under pressure to protect industry from energy crisis

The UK government is coming under fresh pressure to provide financial support for the manufacturing sector amid warnings that some factories will have to shut down because of spiralling gas prices.

Ministers are increasingly concerned about the prospects for the steel, chemicals and ceramics industries, which are highly exposed to a global wholesale gas price that has risen almost threefold this year.

Business minister Lee Rowley will lead a meeting with industry representatives on Monday afternoon and will meet steel chiefs on Tuesday. The talks come as the head of UK Steel stepped up his calls for Prime Minister Boris Johnson to intervene directly in a crisis that has already left consumers facing the prospect of higher energy bills.

A recovery in the world economy, the shift away from fossil fuels and interruptions to the production of natural gas and coal have combined to unleash a global scramble for energy supplies.

Tensions are mounting within government over how best to respond to the fallout for energy-intensive industries. In an unusual move, the Treasury on Sunday denied claims by Kwasi Kwarteng, the business secretary, that the two departments were in talks over financial measures to alleviate the crisis.

Kwarteng had told Sky News he was speaking to government colleagues “particularly in the Treasury” to find a way through the crisis. But a Treasury aide said the department was not “involved in any talks”. 

The lack of progress has left executives concerned. “We need immediate action,” said Dave Dalton, chief executive of British Glass, who described the picture as “alarming” with some companies in his industry “teetering on the edge” of collapse.

Gareth Stace, head of UK Steel, said on the BBC that “the energy crisis of today will fast become the steel industry crisis of tomorrow”.

“What we want government to do is look at two things. One is, look at the government policy costs that add to our bills,” Stace told Times Radio.

“And when I say much more, like 80 per cent more than our competitors in Germany. They are carbon costs, renewables, capacity, network charges. The government could press a button, pull a lever and address those additional costs that our competitors don’t pay.”

Stace had on Sunday told the Financial Times that it was time for the prime minister to “intervene directly”.

Ed Miliband, shadow business secretary, said the government appeared to be “paralysed” by the scale of the crisis. “The government is squabbling amongst itself, with the Treasury even denying they are talking to BEIS [the business department] about providing help for large, energy-intensive industries,” he said.

The BEIS said: “Ministers and officials will continue engagement with industry throughout this week.”

The sharp rise in gas prices has disrupted the UK retail energy market, with a dozen suppliers failing and more expected to follow. Surging prices forced the government last month to provide about £30m of support for CF Industries, a US fertiliser producer that halted production at its UK plants, citing higher energy costs.

The decision to shut production unleashed chaos for the food industry, which relies on the carbon dioxide that is a byproduct of fertiliser production. Government support for CF Industries is set to end on Tuesday, prompting fears that CO2 prices could spike again.

The chief executive of Kraft Heinz has warned that households should get used to rising prices because of the multiple cost pressures facing suppliers.

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