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Soaring Gas Prices Could Close Chemical And Paper Factories, Sending Supply Chains Into Chaos

Soaring Gas Prices Could Close Chemical And Paper Factories, Sending Supply Chains Into Chaos

gas pipes

3 min read

Ministers have received fresh warnings that soaring gas prices could force factories to close without urgent government intervention, as the energy crisis facing Boris Johnson deepens.

In mid-October, the Secretary of State for Business, Energy and Industrial Strategy, Kwasi Kwarteng, handed the Treasury a series of proposals designed to protect energy-intensive industries (EIIs) from the rising cost of gas.

Government sources at the time said there was a real risk of gas becoming too expensive for sectors like chemicals, ceramics, and paper to continue with production — an outcome that would not only spell more disruption for UK supply chains, but also likely result in significant job losses.

Several months on, those proposals have yet to result in new measures, and now industry groups are once again warning that the continued rise in gas prices, which is a big contributor to a growing cost of living crisis in the UK, could soon force factories to shut their doors.

Andrew Large, Director General of the Confederation of Paper Industries (CPI), said on Thursday that he feared ministers would not act until after it's too late to avert a "major crisis".

He told PoliticsHome: "It’s hugely disappointing that the government has not acted to support UK industry through the ongoing energy crisis. Our concern is they are waiting for a major crisis to develop with closing sites and product shortages before we see any action."

PoliticsHome understands that a fall in energy prices over Christmas resulted in ministers feeling that the issues facing gas-reliant industries were not as urgent as they had been in the autumn. 

A government source today insisted that talks with affected industries were still ongoing, however. 

"Ministers and officials continue to engage constructively and regularly with EIIs to understand and to help mitigate the impacts of high global gas prices," they told PoliticsHome.

The rising cost of energy is quickly growing into a major headache for the government, with the Prime Minister under pressure to protect households from soaring bills and a wider cost of living crisis.

Johnson was recently warned by energy suppliers that the average annual gas bill could hit a record £2,000 by April. The UK is being acutely affected by a lack of gas supplies in Europe, further exacerbated in recent weeks by a reduction in supply to the continent from Russia. 

The government is preparing to announce its plan to tackle rising energy prices in the next month after concluding "something needs to be done," according to Sky News. Kwarteng and Chancellor Rishi Sunak are so far resisting calls from energy bosses for a £20billion taxpayer-funded bailout, and instead want banks to support the industry with loans, The Sun reported today.

Labour deputy leader Angela Rayner, who was standing in for Keir Starmer at yesterday's PMQs, warned that an "iceberg" of higher bills awaited households in the coming weeks.

A BEIS spokesperson said: “We remain absolutely determined to secure a competitive future for our energy intensive industries and in recent years have provided them with extensive support, including more than £2bn to help with the costs of energy and to protect jobs."

They added: “We have various funds in place to support businesses with high energy use to cut their bills and reduce carbon emissions, including the £315 million Industrial Energy Transformation fund.”

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