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Producers say shoppers’ bills could rise as supply problems loom amid high gas prices
British producers have raised fears of beer and burger shortages and higher prices for shoppers after the government said it would stop propping up the CO2 industry.
A three-month deal to support the UK’s main producer of the gas, brought in as an emergency measure after a crisis in the autumn, ends next week and it is understood it will not be renewed.
The government provided a temporary bailout to CF Fertilisers, which accounts for 60% of the UK’s CO2 supplies, to counter the threat of chaos in supply chains, after its US owner shut its factories amid the soaring cost of natural gas.
Any holdup in supplies would affect soft drinks and bakery producers as well as meat processors and brewers, who all use CO2 in making and packaging their goods.
It is understood that the government, which pumped in money for three weeks in September before facilitating the current industry deal, has said it will not put up further cash. The deal was supposed to create time for alternative sources of food grade CO2 to be developed, but industry insiders said there had been little progress.
A spokesperson for the Department for Business, Energy and Industrial Strategy (BEIS), said: “It is for the CO2 industry to ensure supplies to UK businesses.”
The current deal supported a UK fertiliser plant, based in Billingham in Stockton-on-Tees, which is one of the main producers of food-grade CO2, until 31 January.
Further production is reliant on a successful deal between CF Industries, the US owner of the plant, and the UK distributors of the gas, Nippon Gases and Air Liquide.
CF, whose Billingham plant can produce 750 tonnes of CO2 per day, told the Guardian on Monday that it was continuing to negotiate with its industrial gas customers.
At a meeting with leading food and drink industry figures on Friday, the government said there was a “reasonable chance” of the talks being successful.
Its fall-back plan involves relying on imports and a smaller plant operated by Nippon. In that case, CO2 supplies will be prioritised for the NHS, the nuclear industry and pork and poultry slaughter, which account for about a quarter of food-grade CO2 use.
Stephen Livens of the British Beer and Pub Association told the meeting that the prospect of a further interruption in supplies was “pretty terrifying” and the UK brewing industry would be in “serious trouble” if it was largely reliant on imports of CO2.
The gas is used to can and bottle beer, clean equipment and in systems that shift beer around a brewery, making it a vital ingredient for the industry.
He warned there would be an impact on consumers, particularly as demand for beer increases over the summer and brewers were already absorbing a 10% to 15% rise in the operational costs of beer-making. with little sign of that reversing.
“A strategic solution has to work for everybody, not just the priority list,” Livens said.
James Calder of the Society of Independent Brewers told the meeting: “For us the situation is perilous,” adding that the price of CO2 had already risen by up to 400% for some businesses.
Tony Goodger of the Association of Independent Meat Suppliers said increased CO2 costs would only add to inflation for shoppers of both food and drink. He said his members were stocking up on CO2 in case of any issues from next week.
He told Defra: “In a World Cup year, demand for alcohol and meat products [will be higher]. We do need a solution in place by Qatar 22 [in November].”
A spokesperson for the Food and Drink Federation trade body said: “We are concerned that with just days now remaining before that agreement comes to an end, and energy prices still very high, there will be further CO2 shortages once again.
“This could lead to shortages in the products we find on our supermarket shelves – adding further pressures to families already coping with high food-price inflation.
“We will continue to work with the government on this. It is critical that together we ensure supply can continue and that we build long-term resilience into the production of food-grade CO2.”