CHEMICAL and process industry leaders have warned that companies face "financial disaster" unless the Government takes immediate action against volatile energy prices.

Fears that huge price rises this year will inevitably lead to a lack of investment, redundancies and closures have been raised by the Northern UK chemical and process industry clusters.

The North-East Process Industry Cluster (Nepic) believes the future lies in the growth of nuclear power and improved competitiveness in the market.

Nepic, which represents 350 chemical and pharmaceutical companies in the region, joined forces with similar clusters across the North to consult on a Department of Trade and Industry energy review.

They said the operation of the European gas market remained "seriously flawed" and have called for a balanced supply policy and improved market transparency.

The chemical and process industry generates 25 per cent of the North-East's economy and employs 35,000 people.

Nepic chief executive Stan Higgins said there has to be less dependence on any one fuel and a move towards nuclear power to create a free market.

"Government policy in the past put a stop to building nuclear power stations, but it realises now that the situation has to change," he said.

"The Government is saying that its going to have to change and they are already gearing up the industry to help them with the next generation of nuclear power stations, which many people believe is inevitable."

Nepic's views, together with the opinions of more than 2,000 businesses, organisations and individuals from across the UK, are being considered as part of the energy review.

The review will look at the measures needed to ensure secure and affordable energy supplies in the UK and tackle climate change.

Yesterday, global chemicals firm Huntsman said it would part-finance a new generation of nuclear power plants on Teesside by signing a 20-year power deal to help offset the £1bn building cost.

The offer has already been passed on to Energy Minister Malcolm Wicks, only weeks before the Government is expected to give its conclusions on the review.

Others contributing during the consultation included manufacturers' organisation the Engineering Employers' Federation Northern and regional development agency One NorthEast.