Kwarteng vows to help mitigate impact of energy prices on UK industry

(Bloomberg) – UK Business Secretary Kwasi Kwarteng has said he will work to ease growing pressure on the industry from soaring gas prices, following a meeting with representatives of energy-intensive companies.

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Kwarteng said he is “committed to securing a competitive future for our energy-intensive industries and pledged to continue to work closely with businesses over the next few days to better understand and help mitigate the impacts of any increased costs. encountered by businesses, ”his department said. late Friday.

Wholesale gas prices have almost six-folded over the past year, putting increasing pressure on domestic consumers and industrial users. While households are to some extent shielded from market turbulence by a twice-yearly price cap, large factories are more exposed, raising fears that some may have to shut down this winter.

The energy intensive users group, whose members include the steel, chemical, cement, paper, ceramics and glass industries, said earlier that Kwarteng was committed to finding ” practical solutions “to help mitigate the impact of soaring energy costs. He said in a statement that he welcomed Kwarteng’s “first steps” to “develop practical solutions and work with colleagues at the Treasury.”

Friday’s meeting came after the EIUG called on ministers to take swift emergency action to ease pressure on large industrial energy consumers, or face shutdowns. Concretely, he wants measures to be taken to contain the prices of gas, electricity and carbon to allow the most exposed companies to continue producing essential goods.

“Non-competitive costs”

The EIUG pledged to work with the government and the energy regulator “to overcome the immediate challenges posed by unprecedented increases in energy prices this winter,” the group said. “Beyond the immediacy of this winter, the government must address the underlying issues that lead to uncompetitive energy costs. “

Kwarteng told the group he “remains confident in the security of the gas supply this winter” and highlighted £ 2 billion ($ 2.7 billion) worth of support for energy-intensive users since 2013 , according to the government press release.

The implications of rising gas prices were laid bare last month when two fertilizer factories closed, leading to a shortage of the carbon dioxide byproduct widely used in the food industry. A lack of CO2 would quickly impact everyday products as it is used to stun pigs and slaughter chickens, in packaging to extend shelf life, and to keep items frozen for delivery.

The government eventually agreed to provide “limited” financial assistance – up to tens of millions of pounds – to allow production to restart and reduce the CO2 shortage. This three-week support program is set to last until next week, in the hopes that the food industry will negotiate higher prices for CO2 and seek other sources.

Rising invoices

It’s not just businesses that suffer the consequences. Kwarteng is also facing demands to reduce the pressure on households after energy regulator Ofgem raised the price cap on average bills by 12% on October 1.

Although the cap will not be changed again until April, the “unprecedented” rise in wholesale gas prices means that a significant increase is then likely, Ofgem chief executive Jonathan Brearley said on Friday.

“We can’t predict what it’s going to be and our data collection goes until February,” he told BBC radio. “But you can see all the turmoil, not just in Britain but around the world, regulators are handling this and we expect significant price hikes.”

Ten energy providers have already failed, in part because the cap prevented them from passing higher wholesale prices on to consumers. Brearley and Kwarteng told an energy conference Thursday that they expected more to follow.

“We have to sit down with the industry, look ahead and make sure we create a more resilient market that can handle shocks like this in the future,” Brearley told the BBC.

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