'Devastating' winter ahead, says chemicals giant

The British chemicals group Ineos has warned a parliamentary inquiry that business in this country faces a "devastating energy crunch" this winter.

The company said that a cold winter would lead to "massive" rises in the price of gas, which "is very likely to put many manufacturers out of business for good".

"Following this, we expect the UK to be short of gas leading to a gas deficit emergency. This will have consequences such as 'three day weeks', wide-scale power cuts, loss of essential services such as water and sewerage and further business closure," Ineos said in written evidence to the Trade and Industry Select Committee Inquiry into security of gas supply.

According to forecasters, including the Meteorological Office, there is a 67 per cent chance this winter will be among the coldest on record. The prediction is based on measuring sea temperatures in the Atlantic.

Ineos said: "We are faced with the nightmare scenario that, in the event of very cold winter weather conditions, the UK will essentially be 'closed for business'. Much of this business will not recover and is unlikely to operate again."

The company, which is headquartered in Southampton, calculated that the "competitive gap" between the UK and European energy prices is costing the UK economy £24bn a year. Ineos said that the price disparity is "already having a devastating impact on UK manufacturing". The British government recently said it wants to see other energy markets in Europe liberalised.

Ineos continued: "We consider it untenable that as the EU's largest and the world's fourth-largest gas producer, we have nearly the world's highest prices and the severe risk of energy rationing in anything other than an average winter. It is not being overly dramatic to warn that in the event of below-average temperatures, the UK will be thrown into crisis."

Ineos complained about both government and gas industry inaction. It said that it was almost too late to do anything for this winter but it outlined a series of measures that could still ease the situation. These included making gas-fired electricity power stations test and demonstrate their ability to useother fuels.

Ineos has sales of about €5bn (£3.4bn) a year. The private company is in the process of buying BP's Innovene business for $9bn (£5bn). The protest over gas prices is led by the Ineos plant at Runcorn, a former ICI facility, where products such as caustic soda are made. The site uses enough electricity every day to power a city the size of Liverpool.

The Trade and Industry Committee also took oral evidence from the energy minister Malcolm Wicks yesterday. He conceded there was "concern" about electricity rationing this winter. "I am concerned that companies get the energy they need. But that does not mean that we talk in exaggerated ways. That would be irresponsible," he said.

Mr Wicks has already described a warning about shortages from the director-general of the CBI, Sir Digby Jones, as "scare-mongering".