Gas price rises: Kwarteng asks Treasury to help firms over cost

The business secretary has asked the Treasury to support industries hit by soaring energy costs, a source has told the BBC.

Kwasi Kwarteng's formal request follows talks between ministers and industry leaders.

The details have not been disclosed, but they are thought to focus on a temporary solution to high prices.

Sectors such as steel manufacturing have called for a price cap amid fears for some factories' survival.

There are a number of reasons for a steep rise in gas prices over the past year - including the reopening of industry after Covid lockdowns.

A source told the BBC that "everyone in government understands the importance of this situation".

"We need to solve this quickly," they added.

On Monday, the prime minister's spokesman said Treasury officials were involved in talks with the Department for Business, Energy and Industrial Strategy (BEIS).

"As you would expect, ministers from BEIS are working across government, including with the Treasury, on this important issue, the challenges currently facing industry in light of global gas prices, and that will continue," he said.

Dave Dalton, chief executive of the British Glass trade body, who was among those at a previous meeting with ministers on Friday, called for "immediate action".

He said some members of his group might have to shut production permanently, although no firm had been forced to do so yet.

The nature of glass manufacturing means production cannot be just paused, he said. "We have large furnaces that run 24/7. If you switched a furnace off, you basically destroy the infrastructure.

"It would have to be rebuilt at a cost of tens of millions of pounds," Mr Dalton said.

Mr Dalton said firms had "hedged" by buying gas in advance at lower prices but in some cases those deals were now expiring leaving firms facing much higher costs.

"We have companies that can't cope in the immediate term. And we have other companies that have to feed back to their masters overseas who will make decisions on their investment in the UK. We need a much better way to planning our way through this problem," he said.

BBC political correspondent Adam Fleming said earlier that Mr Kwarteng would not be involved directly in Monday's talks with industry representatives.

Instead, business minister Lee Rowley was due to lead the meeting, and another with steel bosses on Tuesday.

Adrian Curry, managing director of UK-based Encirc, one of the largest container glass plants in Europe, said industry was not asking for a bailout, but the situation for some companies was critical.

"We pay more for our energy than competitors in other countries," he told the BBC. He said his company would normally spend £40m a year on energy, but was now looking at bills up to £100m.

"It's quite incredible," he said, adding that costs would have to be passed on to customers. While there was not a threat to his company's survival, he said, it was clear talking to others in industry that many companies were hurting.

Domestic energy consumers have a certain amount of protection from rising prices due to a price cap, which sets the maximum price suppliers in England, Wales and Scotland can charge customers on a standard - or default - tariff.

However, the cap was increased on 1 October, meaning about 15 million households face a 12% rise in energy bills.

Industry has no such cap, meaning they are open to the risk of an unlimited rise in prices.

Already manufacturers and services are warning they will have to pass on their rising costs to consumers. And as energy costs are a big driver of inflation, few consumers and households will escape the consequences of the current crisis.

There's no single reason, but a convergence of factors nationally and globally.

There's been a worldwide squeeze on gas and energy supplies as countries emerged from lockdown and industry reopened.

A cold winter in Europe last year also put pressure on supplies and, as a result, stored gas levels are much lower than normal. On top of that, the UK has comparatively fewer gas storage facilities than some countries, meaning it buys more on the wholesale market and is exposed to sharp price rises.

There's also increased demand from Asia (which also suffered a cold winter) for liquefied natural gas. And there is a suspicion that major gas supplier Russia is restricting output (an accusation it denies) which, following the law of supply and demand, has fuelled price rises.

This has helped push up gas prices in the UK, Europe and Asia. Since January, they've risen 250%. And prices have soared 70% since August alone.

Trade group UK Steel told the BBC that Boris Johnson needed to take control before it was too late - although it described as "really good news" an announcement that the country's third largest steel maker, Liberty Steel, would restart operations at its plant in Rotherham later this month.

The Unite union also called on the prime minister to "get a grip" to avert job losses if companies have to shut production because they cannot cope with the increased cost of energy.

However, Conservative MP Mark Harper said the government should resist demands for financial support.

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