Mills join call for an inquiry into doubling of gas prices

British manufacturers are stepping up pressure on the government to act on the doubling of industrial gas prices over the last 12 months.

The Confederation of Paper Industries joined calls for the Office of Fair Trading to investigate the wholesale gas market, warning that the 100% rise since last year was putting an ‘intolerable’ strain on UK manufacturers already hit by sterling’s strength against the euro.

‘There are several mills in the UK that are facing a quite desperate financial situation,’ warned Graham Barnard, the confederation’s director of public affairs. One small paper mill in the north of England announced last week it would lay off 30 employees — about 20% of its workforce — to counter the increase in its input costs, and another went into receivership late last year.

The cutbacks follow the loss of 70 jobs at the ICI methanol plant at Billingham, Cleveland, which is to close following the sale of the rest of the business late last year.

Keith Wey, senior economist at the Chemical Industries Association said other companies in his sector were facing the threat of closure as their 12-month gas supply contracts ran out. ‘At the end of last year, there were a few in a state of panic,’ he said.Other energy-intensive sectors such as steel, aluminium, industrial gases and cement are similarly at risk.

UK companies lay much of the blame for the steep rise in domestic gas prices to sales through the Bacton-Zeebrugge Interconnector — with several saying Continental European utilities have been buying as much British gas as possible to increase UK prices.

Peter Scott, the CPI’s director-general, said the fact the huge increase had occurred in a liberalised market where pricing should be competitive ‘raises serious questions about the behaviour of Continental gas monopolies, which can only be answered by a full and proper investigation’.

The Department of Trade and Industry is investigating what has gone wrong with the market but has yet to unearth the cause.