Gas prices force UK firms to cut back operations

Gas price hikes are forcing energy-intensive manufacturers to cut back their operations in the UK, it emerged this week. Member associations told a meeting of the Energy Intensive Users’ Group on Tuesday that some companies were shutting down capacity in the UK and shifting production elsewhere in Europe. `They’re closing premises,’ said EIUG chairman Ian […]

Gas price hikes are forcing energy-intensive manufacturers to cut back their operations in the UK, it emerged this week.

Member associations told a meeting of the Energy Intensive Users’ Group on Tuesday that some companies were shutting down capacity in the UK and shifting production elsewhere in Europe.

`They’re closing premises,’ said EIUG chairman Ian Blakey. He added that it was apparent at the meeting that prices on offer for year-long contracts are now 80% higher than they were a year ago. `You’re talking 18p (a therm) as against 10p.’

For the largest users, such as steel firm Corus and industrial gas producer Terra Nitrogen UK, this would add up to £50m to the annual gas bill.

Companies are consequently buying on shorter-term contracts or through the spot market in the hope that the problem will be resolved before domestic demand picks up in the autumn and puts further pressure on prices.

Energy minister Helen Liddell told the EIUG she was concerned at the level of prices and had launched a Department of Trade and Industry investigation into the problem alongside one being conducted by gas regulator Ofgem.

The EIUG may also ask the European Commission to intervene, as a sharp increase in exports to continental Europe is one of the factors contributing to the price rises.

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