Appearing before the Treasury Select committee, Bank of England governor Mervyn King told MPs that it would be difficult to predict how price rises may affect economic growth. Organizations which are heavy users of gas could face problems in the face of higher energy costs, leading to a potential decline in supply, potentially slowing economic growth.

Mr King said that the monetary committee would take these factors into consideration when setting the interest rate in the coming months. The position on gas prices in the UK is perhaps a rather specific issue to the UK unlike the movement in oil prices and that is something we will have to watch very carefully, he said.

If there were to be cutbacks to industry and that were to affect the growth of output that would be a supply side effect that we would have to take into account.