Treasury frustration mounts as support for industries poised to close this winter due to the dramatic rise in energy prices is being trampled.
Business sources said there was “a real urgency on our part” to move ahead with a package drawn up by Economic Secretary Kwasi Kwarteng earlier this week following emergency talks with energy-intensive industries.
But the Treasury Department has so far withheld approval and a formal response is not expected until next week.
And Chancellor Rishi Sunak signaled apparent reluctance to intervene in comments at the G7 Washington summit, where he said it was “not the government’s job to step in and start controlling the price of every single product.”
Labor leader Sir Keir Starmer accused ministers of “going missing” as industry fears that gas shortages could force widespread plant closings within weeks in early September.
Manufacturing giant Ineos’ boss Sir Jim Ratcliffe warned that a prolonged cold spell, creating additional demand for gas, could “stall” the industry.
And he blamed government decisions to reduce the UK’s gas storage capacity, telling ITV, “This is a strategic issue for UK energy – you need some storage and we have 10 days.”
But the warning has been called a “complete diversion” by government sources, who said the constant availability of North Sea gas meant the UK would not run out of fuel and it would be protected from ransom extortion from supplier countries like Russia in times of crisis.
“A country like Germany needs large storage facilities because it is 90 percent dependent on Russia,” said an official. “We have the best gas storage facility in the world, the North Sea. We have huge gas reserves that we can tap at any time. The current concern is not security of supply, but costs. “
Details of Mr Kwarteng’s proposed bailout have not yet been disclosed to the industry, but the package is said to revolve around government-backed loans to support viable businesses during the period of abnormally high gas prices – up to ten times their level a year ago – rather than grants to support troubled companies.
According to reports, Mr. Sunak conducts rigorous “value for money” tests on all financial support.
After attending a G7 finance ministers’ summit, the Chancellor said in Washington: “We are ready to work with business and to support it if necessary.
“But in general I believe in a market economy because it has served us very well in this country. It is not the government’s job to manage the price of every single product. “
The chairman of the Energy Intensive Users Group, Dr. Richard Leese, hailed the economics minister’s commitment on Monday, saying the industry wants “an equally quick response” from the Treasury Department.
But during a visit to a steel mill in Sheffield on Thursday, Sir Keir said ministers were instead “arguing” about their reaction.
The Labor leader said it was “unforgivable” if a short-term rise in energy prices resulted in job losses.
“What the steel sector needs is government support and action,” he said. “What we have is a government that is lacking in action.
“These are not discussions that should be with the industry. It is not doing what is necessary to save the jobs at risk. You have submitted the ‘Out of Office’ registration. That is not acceptable. “
The director general of the Confederation of Paper Industries, Andrew Large, said The independent one that there will be real concern if there is no support package by early next week.
“In discussions with ministers, we have suggested that time is of the essence and that we need a workable plan for the industry in days or weeks, not weeks or months,” said Mr Large. “It’s not out of our timeframe yet, but we fear that it may slip out of our timeframe. We’re ready to give the Treasury Department some breathing space, but we’ll be rattling back in their cage by the end of this week or early next week. “
He urged ministers to follow the example of the EU, which has already approved state aid and tax breaks to ease the burden on companies with high energy consumption.
“We believe we have made it clear that this is an unprecedented situation and that the cost to the UK of further disruptions to industry and society in the form of job losses and plant closures is higher than the cost of support that is in the US will be needed next weeks and months. “
Even with a significant portion of energy bills hedged to protect against price fluctuations, large paper companies face losses of up to £ 50 million due to the rise in prices.
And he warned that a package that only offered loans rather than grants or relief would be of “limited use” to companies reluctant to increase the debt built up during the Covid pandemic.
UK Steel, which also participated in talks with Mr. Kwarteng earlier this week, warned that temporary shutdowns and breaks in production are becoming a “fact” for many companies. And there were fears that further delays in finding a solution would make UK industry less competitive, resulting in longer and more frequent downtimes.
Meanwhile, Sunak insisted that despite the ongoing supply chain crisis, there will be a “good amount of Christmas gifts” this year.
A cargo jam at Felixstowe has led Maersk to choose to divert ships from the port of Suffolk, while similar traffic jams have been observed in other parts of the world, including the United States.