Industry warns of job losses if winter fuel costs rise again

Manufacturers are warning they will lay off more workers this year if, as forecast, the winter is colder than average and fuel costs are driven up as a result.

British Glass, which represents glass manufacturers, said that 1,000 jobs were lost in the last three months of 2005 alone because of soaring costs and warned that more were likely to follow this year.

David Workman, the director-general of British Glass, is meeting the Energy minister, Malcolm Wicks, later this month to tell him of the growing crisis faced by energy-intensive industries such as glass manufacturers, which alone employ around 15,000 workers in the UK.

"A number of our members are struggling," he said. "In the new year, we will see another round of job cuts in industry if fuel costs do not come down."

The Met Office says there is a two-in-three chance that this winter will be the coldest for the past 10 years.

Gas prices started to rise again last week on the back of the colder weather, reaching 77p per therm on Friday, almost double the average for previous winters. This is still much lower than the spike in November, when prices soared above 150p per therm. Forward gas prices are 50 per cent higher in the UK than in Europe, according to the Energy Intensive Users Group.

Andy Waring, the energy purchasing manager of Ineos Chlor, a chemical manufacturer, said that the company's plants only operated at one quarter of their full capacity during November to save fuel and keep costs down. Fuel costs account for around a third of heavy industry's operating costs.

He warned that there will be a gas shortage this year if there is an exceptionally cold winter, and that even companies such as Ineos Chlor, which have signed uninterruptible gas supply contracts, face being cut off to keep households connected.

"There is not enough gas to keep both households and industry going," Mr Waring said. "Everyone is on tenterhooks to see what the weather is going to be like this month and February. Things are going to get sticky if we have a colder than average winter. This is the great fear."

Terra Nitrogen, a chemicals manufacturer listed on the New York Stock Exchange, announced at the end of November that it was suspending production of ammonia at its Teesside plant and reducing its production at another site in Bristol because of energy costs. A spokes-woman could not say this weekend when full production would resume at either site.