UK government warned of energy crisis

The government is warned today that Britain’s manufacturing recovery could be derailed by rising energy prices and consumers could face winter blackouts because of a short-fall in generating capacity.

Tonight Digby Jones, director general of the CBI, will urge the government to avoid any moves which could push up energy prices and cause the recovery in the manufacturing sector to stall.

Separately, Derek Simpson, general secretary of the trade union Amicus, is warning that power blackouts could become routine over the next few years because of what the union sees as “serious problems blighting the UK’s generating capacity”.

In a speech to some 900 business leaders tonight, Mr Jones will point out that gas and electricity prices have risen by 40% over the past year, oil is up by more than 75%, while metal prices have risen by more than half.

“I am worried that rising costs will take the wind out of the sails of the manufacturing recovery. Earlier in the year – when global demand was stronger – companies were able to raise prices and pass on some costs, but this may be more difficult if demand weakens.”

The CBI is concerned that the manufacturing and power generation industries must be given a fair carbon allocation under the government’s plans to meet its climate-change targets. It also wants interest rates to be left on hold and says the chancellor should not increase business’s tax burden.

“The government should take note of the pressures that companies are facing. There are key decisions coming up on levels of carbon targets and business taxation. If ministers do anything to harm manufacturers now, they will be scoring a real own goal,” says Mr Jones.

For its part, Amicus is concerned that a combination of EU directives and the closure of some of Britain’s older nuclear power plants will affect the country’s ability to generate sufficient electricity.

It believes that EC directives on carbon emissions trading will shorten the life expectancy of some of Britain’s generating capacity which, “together with the reduction in nuclear generating capacity due to the closure and decommissioning of the magnox nuclear power stations, [means] the UK’s ability to generate its own dependable energy supply will be seriously reduced.”

The union wants a government review of future energy requirements and greater investment in clean coal-fired power stations which cut emissions of gases such as sulphur dioxide, nitrous oxide and carbon dioxide.

“Dire consequences could follow if the action Amicus is demanding is not taken. We could be suffering routine blackouts in the next few years and the sort of energy price hikes we have seen in recent weeks because of the increasing reliance on foreign supplies from unstable countries,” Mr Simpson says.

Ten power stations are scheduled to close over the next decade, while only two are under construction, according to Amicus.

Yesterday the Department of Trade and Industry said security of supply was central to the government’s energy policy and it was confident there was sufficient generating capacity for both the short and long term.