Government's £100m CO2 plant rescue highlights vulnerability of UK food sector

The UK government has agreed to invest £100m to reopen a carbon dioxide plant in Teesside as a contingency against supply disruptions from the Iran conflict, according to BBC Business^[1]. The decision underscores the critical vulnerability of the UK's food and beverage manufacturing sector to CO2 supply shocks.

Strategic importance of CO2 to UK food production

The Ensus plant at Wilton International industrial site will restart operations after being mothballed in September^[1]. Carbon dioxide serves essential functions across the food supply chain - it is used to stun livestock during slaughter, in packaging to keep food fresh, and in the production of fizzy drinks^[1].

Business Secretary Peter Kyle said the move would "boost the resilience of our supply chains and protect critical UK sectors like food production, water and healthcare, as well as the jobs and communities that depend on these industries"^[1].

The decision, first reported by the Financial Times, is believed to have been partly driven by concerns about the rising cost of energy on fertilizer companies in Europe, which also produce CO2 as a byproduct^[1].

Scale of the UK food and beverage manufacturing sector

The UK's company register contains 5,521,752 active companies^[2]. While specific counts for food and beverage manufacturers are not isolated in the available data, the manufacturing sector represents a significant portion of UK industry, with thousands of businesses potentially dependent on reliable CO2 supply.

The geographic distribution of UK businesses shows heavy concentration in major urban areas, with London accounting for 1,078,959 companies, followed by Manchester with 104,817 and Birmingham with 94,948^[3]. This geographic spread suggests that many food and beverage manufacturers are located far from the Teesside CO2 production facility, potentially increasing their vulnerability to supply chain disruptions.

Historical context and current pressures

The UK food and drink industry previously faced a CO2 crisis in 2021 after the price of wholesale gas surged and fertilizer producers struggled with higher manufacturing costs^[1]. Supply problems and higher costs returned the following year^[1].

The current situation has been exacerbated by geopolitical tensions. Oil and gas prices have risen sharply since the US and Israel launched military action against Iran on 28 February^[1]. Tehran has effectively closed the Strait of Hormuz, which is a vital shipping route for a fifth of global oil and gas supplies^[1].

The Ensus plant's closure was initially triggered by a government trade deal with the US last May which removed a 19% tariff on ethanol imports up to a quota of 1.4bn litres, approximately equivalent to the size of the UK market at the time^[1]. This led to Vivergo Fuels, which was owned by Associated British Foods and produced bioethanol, closing and Ensus's plant being mothballed^[1].

Economic impact and employment considerations

Grant Pearson, chairman of Ensus UK, said the reopening was "excellent news for its employees and those in our extensive supply chain"^[1]. He noted it "strengthens the broader Teesside manufacturing economy and the UK's resilience in relation to biogenic CO2 supplies. These are vital to food and drinks companies, as well as being important to hospitals, abattoirs and the nuclear industry"^[1].

The business at Wilton International industrial site employs about 100 people and supports a UK supply chain of about 3,000 jobs^[1].

Wider manufacturing sector pressures

The CO2 supply concerns come at a time when UK manufacturers face multiple operational challenges. Recent data shows 113,542 companies across all sectors are currently in various forms of insolvency proceedings, with 108,443 in liquidation, 4,114 in administration, 702 in voluntary arrangements, and 283 in receivership^[4].

The manufacturing sector has also experienced other supply chain disruptions recently. Jaguar Land Rover temporarily stopped production on car lines at its Solihull plant due to a parts issue involving a supplier, with the pause expected to last about two weeks^[5]. This followed a major cyber attack that forced the West Midlands manufacturer to shut down its computer networks for several weeks last year^[5].

Future outlook

The government's £100m investment represents a significant intervention to protect critical infrastructure and supply chains. As geopolitical tensions continue and energy costs remain elevated, the resilience of the UK's food and beverage manufacturing sector will likely remain under scrutiny. The reopening of the Teesside plant may provide immediate relief, but questions about the sector's long-term vulnerability to supply shocks and energy price volatility persist.

With thousands of food and beverage manufacturers distributed across the UK, the concentration of CO2 production at limited facilities creates potential bottlenecks that could impact the entire supply chain. The current situation highlights the delicate balance between market forces, international trade policies, and the need to maintain critical domestic production capabilities.