HIGH UK gas prices are threatening the competitiveness of the region's chemicals industry and could lead to companies pulling out of this country, a pressure group has warned.

Prices for gas have been so volatile in recent weeks that the Chemical Industries Association (CIA) warned that some companies have had no choice but to cease trading.

Combined with increasing oil prices and the weak US dollar - which is used as the trading currency for most chemical companies - the situation is looking bleak, particularly for smaller businesses.

The CIA is calling on the Department for Trade and Industry, and the gas watchdog, to press for greater transparency amid gas price rises.

CIA director general Judith Hackitt said: "There appears to be no rational explanation for the market's behaviour. These price hikes go way beyond what can be explained by a temporary spell of cold weather."

A CIA spokeswoman said: "The chemical industry can no longer absorb these extremely high and volatile gas prices, which have a knock-on impact to electricity costs.

"Current gas prices are seriously damaging UK industry competitiveness and in many energy intensive sectors, short-term stops may lead to longer-term job losses.

"If gas prices remain at this level the economic impact could be severe."

Jez Stewart, who represents the region's chemical companies for trade union Amicus, said he was not aware of any North-East companies having to stop trading this year.

But he said: "The kind of companies that would be most affected are smaller companies which are less likely to have unions, so that's not to say that none have been affected, it's just we wouldn't necessarily know about it.

"Certainly some of the smaller operations are finding it difficult."

Recently, Air Products, which owned the former ICI chemical plant at Billingham, was forced to close with the loss of 80 jobs after failing to sell the factory.

Huntsman and Invista have also made dozens of redundancies in the region between them, but these were part of restructuring programmes rather than any direct effects of rising raw materials costs.

However, a spokesman for SembCorp Utilities, which manages the Wilton International chemicals site in Teesside, said the global chemicals industry was picking up thanks to strong demand from Chinese manufacturers.

Mr Stewart said: "The industry might be facing some difficulties, but there have been some great developments in the region, with Huntsman deciding to build its polyethylene plant at Wilton, and also the provision of a wood-burning power plant there, which is creating jobs.

"All these things mean that the region's chemical industry will be more secure. We can't afford to lose it anyway because Teesside is so reliant on it.