Manufacturing

Sunak considers rescue plan for UK sectors hit by energy crisis


Chancellor Rishi Sunak is considering a rescue plan to help the steel industry and other energy-intensive sectors through a winter of soaring gas prices, a day after Treasury insiders said no such proposal was being discussed.

Kwasi Kwarteng, business secretary, submitted a formal proposal to Sunak on Monday, said by people close to the discussions to include loans and other support worth in the low hundreds of millions of pounds.

Tensions in Whitehall over government assistance for energy-intensive industries — including steel, ceramics, glass and paper — transpired on Sunday after Kwarteng suggested he was talking to the Treasury on the issue.

Treasury officials immediately struck back, saying that Sunak was not involved in any talks on the issue. One anonymous media briefing suggested that Kwarteng was making things up.

But on Monday Boris Johnson, prime minister, who was holidaying near Marbella in Spain, called an end to the dispute. Downing Street insisted that the Treasury was involved in trying to find a solution to the problem.

Downing Street said ministers were looking at “what can be done to mitigate” the effects of spiralling energy prices. On Monday, an ally of the chancellor said Sunak had “an open mind” on the issue.

Kwarteng is said by government officials to have submitted a series of options to Sunak to “support companies through the winter months” and to keep factories open in the face of high input prices.

“These are competitive industries facing a squeeze because of high global prices,” said one. Officials said grants would not be available. “These are viable businesses, so we’ll want some of the money back,” said one.

Dave Dalton, chief executive of British Glass, said after a meeting with Kwarteng on Monday that support would most likely come in the form of loans similar to those given out during the pandemic to struggling businesses, rather than any handouts or a price cap.

“He didn’t give me the confidence that [the] Treasury were in the mood to be any more liberal,” Dalton added.

The chancellor’s colleagues said he is determined to carefully scrutinise any plans for taxpayer support. Sunak is trying to impose discipline ahead of a public spending review and Budget on October 27.

In particular, Sunak’s allies say the chancellor will want to assess what shareholders in the companies affected are doing to absorb the extra costs and what buffers were put in place against rising prices.

The Energy Intensive Users Group, which represents the UK’s energy intensive industries, said it was “optimistic” that its main request for cost containment measures — addressing the increases in gas and electricity prices — would form part of final government proposals.

In the medium-term, the steel industry has called on ministers to close the gap between continental and British industrial power prices, something it says could cost around £50m a year.

Gareth Stace, head of UK Steel, said on the BBC that “the energy crisis of today will fast become the steel industry crisis of tomorrow”.

Rachel Reeves, shadow chancellor, said Sunak had been “missing in action” and urged him to guarantee that no energy intensive business would be allowed to fail because of the “temporary” increase in energy prices.

Meanwhile CF Industries, the UK’s biggest supplier of CO2, on Monday agreed to maintain production at its Billingham plant until January after negotiating new contracts with gas wholesalers to avert a severe gas shortage affecting sectors from food to healthcare.

The Billingham plant in north-east England was reopened last month after the government provided temporary aid, but this ends on Tuesday. The support package came to about £30m and the government has insisted it will not extend it. The meat and poultry industries had warned of chaos if supplies were stopped.

CO2 is used to make drinks fizzy, stun animals for slaughter and cool nuclear power plants.

Richard Griffiths, chief executive of the British Poultry Council, welcomed the deal to ensure the Billingham factory continued producing CO2, but said it would provide only a “bit of breathing space”.

Additional reporting by Sarah Neville

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​Letters in response to this article:

Proposal for the Treasury to take a punt on gas prices / From Hereward Drummond, Southsea, Hampshire, UK

Bailouts are the wrong energy crisis response / From Professor Michael Ben-Gad, Professor of Economics, City, University of London London EC1, UK



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