Factories 'could close' as energy costs soar, leaders warn government

Leaders from the steel, glass and paper sectors have met with ministers, urging them to take action, ITV News Correspondent Charlotte Cross reports

Industry leaders are warning the government that some factories are potentially weeks from closing as energy prices continue to soar.

Rising prices means it is costing significantly more than normal to make products and, in some cases, it may no longer be affordable to carry on.

The government is being pressured to step in to help firms - with the British Chambers of Commerce calling on Saturday for an energy price cap for businesses, similar to the one in place for households.

Steve Elliot, chief executive of the Chemical Industries Association said: "The time to act is now for many. If nothing changes in the next two to three weeks, then there will more companies that will be pausing or shutting production. I am sure of that."

Gareth Stace, Director General of UK Steel, told ITV News: "If the government doesn't take any action, then basically what we will see for the steel sector is more and more pauses of production at certain times of the day.

"And those pauses will become longer."

He added: "If this crisis goes on further and the government doesn't take any action then in the months to come, we will certainly, I would say, see job losses in the steel sector."

Meanwhile, the association that represents the UK's paper-based industries said if the current situation continues, some in their sector will have to make difficult decisions.

The next few weeks are vital, industry leaders tell ITV News Political Reporter Shehab Khan on Friday

Andrew Large, Director General of the Confederation of Paper Industries, said: "I cannot rule out, I'm afraid, that one or two of them will be forced to suspend production as a result of those increased costs."

The Energy Intensive Users Group (EIUG) echoed Mr Large’s comments.

In a statement it said it had welcomed the opportunity to meet Business Secretary Kwasi Kwarteng on Friday and is pleased he wants to find practical solutions to the challenges members face going into this winter.

What is the government doing to minimise the impact of soaring energy prices?

EIUG chair Dr Richard Leese said: “Our message to the secretary of state was for prompt and preventative measures to help avoid recent production curtailments in the fertiliser and steel sectors being replicated in other areas this winter.

“EIUG will work with government to avoid threats both to the production of essential domestic and industrial products, as well an enormous range of supply chains critical to our economy and levelling up the country.”

Dr Leese BBC Breakfast on Saturday morning the Business Secretary “took on board” the three proposals put to him.

His first proposal was for the government to look at “cost containment measures” over winter, as relief for the industry is “not widespread”.

He went on to say: “Our second measure is to look at network costs within the UK. Network costs are distributed differently to other European countries in terms of energy intensive industries getting a higher proportion of the network costs, and that’s something within Ofgem’s gift.

“The third measure is to look at emergency measures, should any of our energy intensive plants need to shut down rapidly, looking at the threshold for emergency relief to try and prevent lasting damage to very expensive plants and equipment.”

The EIUG’s membership is made up of trade associations and customer groups representing industrial sectors with the heaviest energy consumption in the UK.

These are:

  • UK Steel

  • the Chemical Industries Association

  • the Confederation of Paper Industries

  • the Mineral Products Association

  • the British Glass Manufacturers Federation

  • the British Ceramic Confederation

  • BOC (the UK's largest provider of industrial, welding and specialist gases)

  • Air Products

  • the Major Energy Users Council

Energy bills could soar

Analysts have predicted Britons could see their energy bills rise by 30% next year.

Research agency Cornwall Insight has claimed further volatile gas prices and the potential collapse of even more suppliers could push the energy price cap to around £1,660 in summer.

The forecast is approximately 30% higher than the record £1,277 price cap set for winter 2021-22, which commenced at the start of October.

Paul Richards, chief executive of supplier Together Energy, which he said is making losses, told BBC Radio 4’s Today programme said the price cap "is not fit for industry, nor is it fit for customers".

He explained: “When the converse situation arises and the wholesale price starts to drop sharply, the price that will be passed through to customers in April might feel like a very, very poor deal, whereas at the moment the price cap feels like a price that is too good to be true.

“Although customers are protected in the short term I think we’re looking at somewhere between £1 billion to £3 billion in costs that are going to be spread back across business and households as a result of these failed suppliers.”

Suggesting reforms including inspecting the cap four times a year, Utilita Energy’s non-executive chairman Derek Lickorish said: “The cap is not fit for purpose.

“There is no doubt that there is going to be a huge cost paid by customers for failed suppliers… certainly well over £100 million for every 200,000 customers that fail.

“The government has to look at means by which they can support not only energy suppliers but also big industry.”

In addition, the Times has reported that the government is planning to introduce new charges on gas.

The government could cut the price of electricity and impose a levy on gas bills to fund low-carbon heating, the newspaper said.

The new strategy would be published before the Cop26 climate conference in Glasgow next month and there would be consultations before the plan is put in place.

What has the government said?

In a statement, the Department for Business, Energy and Industrial Strategy said about the meeting: “Mr Kwarteng began the call by saying he wanted to hear directly from industry leaders about the impact high global prices were having on their businesses and wider supply chains.

“The business secretary stressed that the government remained confident in the security of gas supply this winter.

"He also highlighted the £2 billion package of support that has been made available to industry since 2013 to help reduce electricity costs.

“The business secretary noted he was determined to secure a competitive future for our energy-intensive industries and promised to continue to work closely with companies over the coming days to further understand and help mitigate the impacts of any cost increases faced by businesses.”

What has Labour said?

Ed Miliband, Labour’s Shadow Secretary of State for Business, Energy and Industrial Strategy, responding to Mr Kwarteng’s meeting, said: “This is an energy crisis made in Downing Street.

"Kwasi Kwarteng is scrambling to meet industry bosses but he is all talk. This chaotic Tory government got us into this mess in the first place and has no plan to address it.

“Warm words at a meeting will be cold comfort for consumers and business who are facing ever increasing energy prices and a cost of living crisis.”