Gas prices peaked on Wednesday but fell back after Russia suggested it could increase supplies © Paul Iddon via Getty Images
Gas prices peaked on Wednesday but fell back after Russia suggested it could increase supplies © Paul Iddon via Getty Images

Business leaders call for industrial energy price cap

7 October 2021

Businesses have called for a “cost containment measure” to prevent industry shutting down due to high energy prices.

Bodies representing the UK paper and ceramic industries warned consumer prices would rise and plants would have to close unless action was taken.

The call came as the government announced a plan to decarbonise the electricity system by 2035, with more energy from domestic renewables, which it said would reduce reliance on gas.

Andrew Large, director general of the Confederation of Paper Industries, told BBC Radio 4: “There is currently no cap on business energy costs and one of the things that we're calling for is a temporary winter cost containment measure to try and put a lid on those costs so that these very important industries for the British society are going to be able to continue to operate.”

Domestic energy costs are capped by Ofgem, however such caps do not exist for businesses.

Large said costs would “clearly” have to be passed onto customers, with toilet roll, food packaging and sterile medical packaging at risk of price increases.

He said: “This is a hugely inflationary situation for the British economy, and members will clearly be in a position where they have to try to pass those costs on to consumers.”

Laura Cohen, chief executive at the British Ceramic Confederation, warned energy prices could close production sites.

“As the high pricing extends, more members are likely to be forced to stop production due to economically higher energy costs,” she said. 

“But we're also concerned the prices reflect the market’s views about the physical availability of gas over the winter. In the event of a national supply shortfall our members are near the front of the queue to be forced off the gas network while households are last, and this can happen at very short notice.

“A forced quick shutdown runs a very high risk of severe damage to brick kilns, which can be 100 metres long, operating over 1,000C, and that can threaten business viability.”

Gas prices hit record highs on Wednesday but fell back after Russian president Vladimir Putin suggested gas supplies into Europe could be increased.

The SM Commodities Index shows gas prices have risen 77% year-on-year 

Business secretary Kwasi Kwarteng, speaking at the Energy UK conference, said: “Relying on homegrown power generation will protect consumers from gas price fluctuations. And it will in the long run bring down bills. 

“I think the volatility of the gas price has shown that we do need to plan strategically, and I think net zero helps us do that, for a secure, affordable, and sustainable energy system.

“The recent issues that we have with the volatility of the gas price, the incredible spikes, and then falling back; this great uncertainty in the market shows exactly why we need to vigorously pursue our climate goals and to strengthen energy security – while, above all, protecting consumers and the planet.”

The government has said reasons for high wholesale gas prices include economies reopening after Covid lockdowns, a cold winter, high demand in Asia for liquefied natural gas, and maintenance projects rescheduled from 2020.

Rising gas prices forced the shutdown of SF Industries, a key supplier of CO2 – essential for the humane slaughter of livestock and keeping food fresh – before the government agreed to cover its operating costs to continue production.  

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