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The steel industry has said government proposals to lend money to heavy industry to help energy-intensive businesses survive the impact of soaring gas prices would be little more than a “sticking plaster”.

Uncertainty about how to support those industries, which have warned of factory shutdowns and higher prices for consumers, has already sparked a row between the Treasury and the business secretary, Kwasi Kwarteng, over whether to offer financial support.

While the Treasury is understood to be reluctant to fund a bailout, ministers are weighing up proposals from Kwarteng to provide short-term loans or guarantees while gas prices are high, to help sectors such as steel, glass, chemicals and paper.

The trade body UK Steel said it backed Kwarteng in calling for assistance from the chancellor, Rishi Sunak, but warned that short-term lending alone would leave the industry battling against a “hostile environment” and at risk of shutdowns.

“While the business secretary’s swift intervention is to be commended, we must see the details of such a proposal, to assess whether these measures will be sufficient to deal with the immediate problems we face,” its director, Gareth Stace, said.

“Our message directly to the prime minister is please don’t just apply a sticking plaster to what is a significant long-term problem. Action can and must be taken now to secure the foundations of British industry.”

Kwarteng met representatives from industries including steel, paper, glass and chemicals on Friday and again on Monday, to hear their pleas for assistance, including immediate support to weather high gas prices and longer-term reductions in costs, such as discounts on green levies.

But the government is yet to come up with concrete plans to address the problem, while industries such as steel are also hoping for more long-term policy measures to ease electricity costs, which are high relative to European peers.

“The key measure of success for this proposal is whether it places UK steel producers on a level playing field on energy costs compared to the European counterparts,” Stace said.

“Key to this will be a mechanism that shields steel producers from the extreme wholesale price spikes we’ve seen in recent weeks, while also looking ahead to measures that reduce the excessive policy and network costs UK producers have long been saddled with.

“If any package delivers less than this and we still continue to pay more for energy than French and German steel producers and we remain at a competitive disadvantage.

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“Steel producers here in the UK will continue to have to pause steel production, will be less efficient and will lose margins and market share.

“This is a hostile environment for industrial investment in the UK and for the government’s levelling-up agenda.”

The Guardian has approached the Department for Business, Energy and Industrial Strategy for comment.



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