Fears for frozen food supply as energy crisis escalates

·6 min read
Kwasi Kwarteng
Kwasi Kwarteng

Frozen food, turkey and chicken supplies could run short as a result of the escalating energy crisis, shoppers were warned last night as the Government called urgent talks with suppliers.

Ocado, the online grocer, warned customers it has a "limited stock" of frozen items due to a "UK-wide shortage of dry ice", while poultry and other meat producers face being unable to cull their animals due to a shortage of carbon dioxide gas.

Ranjit Singh Boparan, the owner of Bernard Matthews and 2 Sisters Food Group, said Christmas dinners could be "cancelled" as a sharp rise in natural gas prices has meant two large fertiliser plants in Teesside and Cheshire - which produce CO2 as a by-product - have shut, cutting supply to the food industry.

It comes amid concerns that four energy companies could go bust in coming days and part of a spate of bankruptcies set to push up customer bills.

Kwasi Kwarteng, the business secretary, will meet the regulator, Ofgem, on Sunday and hold crisis talks with the energy industry on Monday.

It follows a round of calls between Mr Kwarteng and major energy suppliers into the evening on Saturday, after which industry sources said he “definitely gets how incredibly serious this is”.

“If you are not hedged you are in big trouble,” said the source. “We are into science-fiction levels of prices - if you are trying to secure energy at these prices you risk losing hundreds of millions of pounds.”

There are fears companies’ supplies of carbon dioxide could run out within 14 days.

Mr Boparan said: "The CO2 issue is a massive body blow and puts us at breaking point, it really does - that's poultry, beef, pork, as well as the wider food industry.

"Without CO2, the bottom line is there is less throughput and with our sector already compromised with lack of labour, this potentially tips us over the edge."

Nick Allen, chief executive of the British Meat Processors Association, said: “I'm hoping there are conversations going on with the owners of the fertilizer plant to continue some production, on the basis that this by-product is such a critical part of the supply chain. After that, I am absolutely terrified, really.”

Kerry Maxwell, spokesman for the British Poultry Council, said the tightening of carbon dioxide supply was “the last thing industry needs” on top of labour shortages.

She added: “We know that carbon dioxide demand increases, not just for poultry, as we approach Christmas, and that’s going to place additional pressure on supplies.”

Carbon dioxide is also used in the NHS and in the nuclear power industry, and it is expected they would be prioritised.

The British Beer and Pub Association said it was “keeping a close eye on the situation” in case supplies of carbon dioxide to put the fizz in beer are affected.

Four energy suppliers have already collapsed over the latest two weeks, with wholesale natural gas prices about 450pc higher than this time last year and electricity prices hitting £540 per MwH on Monday - about eleven times higher than their record over the latest decade.

There are concerns that four more - supplying around one million customers in total - could collapse in coming days due to the soaring prices.

Baringa, the energy consultancy, is said to have warned that there could be "less than 10 suppliers" by the end of winter, compared to about 50 now. The small players who have rushed into the market in recent years are likely to be most at risk.

The rising wholesale prices are likely to lead to higher household energy bills when the level of the price cap is reviewed in April to reflect suppliers’ costs over the previous six months.

Customers whose supplier has collapsed are moved onto a new supplier by the regulator, Ofgem, and can also find their own supplier, although in the current environment this is likely to mean higher bills as cheap deals disappear from the market.

The supplier appointed by Ofgem to take on those customers can also recoup the costs of doing so from the rest of the industry, which is then passed back onto bills.

Industry sources have suggested strong suppliers are reluctant in the current climate to volunteer to take on new customers, given the expense of supplying them at current rates.

Britain’s gas comes from its own North Sea supplies as well as pipeline imports from Norway and Europe, and shipments of liquified natural gas from Qatar, Russia and other parts of the world.

Europe, in turn, imports about 40pc of its gas from Russia. On Friday night, more than 40 MEPs signed a letter accusing Russian state gas giant Gazprom of “deliberate market manipulation” by ratcheting up gas prices to record levels.

The MEPs said recent actions by Gazprom raised suspicions of a deliberate effort to use energy prices to apply political pressure to Europe.

Gazprom wants to get the green light to immediately start up a controversial new gas pipeline to Germany, Nord Stream 2. It has completed construction but must get the final regulatory approval from Germany and the EU to start using it. Gazprom has denied manipulating supply to drive up prices and force through the opening of the pipeline.

In a message posted on Twitter following calls with industry, Mr Kwarteng, the business secretary, said he was “reassured that security of supply was not a cause for immediate concern.”

He added: “The UK’s gas system continues to operate reliably and we do not expect supply emergencies this winter.

“Protecting customers during a time of heightened global gas prices is an absolute priority. The Energy Price Cap exists to protect millions of customers. Initiatives such as the Warm Home Discount, Winter Fuel Payments and Cold Weather Payments will help further."

He added: "Some energy companies are facing pressure. Ofgem has robust measures in place to ensure that customers do not need to worry, their needs are met, and their gas and electricity supply will continue uninterrupted if a supplier fails.

“Energy security is an absolute priority. We are confident supply can be maintained. Our largest single source of gas is from domestic production, and the vast majority of imports come from reliable suppliers such as Norway. We are not dependent on Russian oil and gas.

“However, our exposure to volatile global gas prices underscores the importance of our plan to build a strong, home-grown renewable energy sector to further reduce our reliance on fossil fuels. Renewable energy has quadrupled since 2010, but there is more to do."

A spokesman for the department for environment, food and rural affairs, which is helping manage carbon dioxide shortages, added: “We are aware of the issues faced by some businesses and are working closely with industry to provide support and advice.

"We have had extensive meetings with representatives from the meat production and processing sectors, and we are continuing those conversations over the weekend.

“The UK benefits from having access to highly diverse sources of gas supply to ensure households, businesses and heavy industry get the energy they need at a fair price."

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