EXECUTIVES at British Polythene Industries have warned high energy costs in the UK are putting the company off making major capital investments in its domestic market.

Chief executive John Langlands blamed subsidies for green energy projects as a large factor in the soaring energy bills the company is facing.

He said the funding of these initiatives is coming at a major cost to industrial businesses.

He said: "It is coming to the point where if you project it forward half the cost of the electricity bill, this applies to domestic as well as business consumer, will be to government choice in regulation rather than the raw cost of power.

"It is becoming very, very expensive. These green initiatives are not cheap and they are coming at a cost to British industry.

"It is not how you run an industrial country if you want to think [to the future]."

Statistics from the Department for Energy and Climate Change show average UK industrial electricity prices in the UK for 2012 were the fourth highest in the G7 while gas prices were the third lowest.

When asked on what ways BPI could try to mitigate its energy costs in the UK Mr Langlands said: "You can move capacity to areas where power is a bit cheaper."

That view was echoed by chairman Cameron McLatchie who confirmed the Greenock-company was making much of its £20 million investment this year in Europe, Asia and North America as operating costs in those areas are cheaper.

He said: "We are investing in new capacity in Belgium and replacement capacity in Canada.

"The last area we will probably invest in this year is Xinhui in China. So you can see our strategic projects are very clearly being done outside the UK."

There is still some capital investment being made in the UK with new lines at plants, including in Ayrshire, in order to improve products and reduce wastage.

Both Mr McLatchie and Mr Langlands believe fracking - where water , sand and chemicals are injected into rock to release gas inside - could offer the potential to provide lower energy costs in the UK and pointed to the change in energy mix the US has seen since it embraced the technique.

However Mr Langlands said was not enough urgency being shown by government to provide a framework for a UK fracking industry.

He said: "It requires government action to sort out the legal issues around who actually owns all of this and the environmental issues of allowing people to actually do something about it.

"Current policy is to deal with it on a case by case basis and I am afraid that is just not good enough.

"We need someone to stand back and say 'this needs to be done, how do we achieve it and what do we have to put in place to make it happen?'"

In spite of UK energy costs and rising raw material prices BPI, which employs 350 in Scotland at Greenock, Stevenston in Ayrshire and Dumfries, posted a 14% hike in half-year profits from £12.1m to £14.1 million thanks to strong performance in Europe and improvements in North America.

Turnover grew 3% from £273.1m to £282.2m although there was only a small improvement in volumes to 150,700 tonnes.

Mr McLatchie said there were signs of stability in demand from Europe as well as small improvements from the construction and drinks industries.

He said: "There are little signs but let's not get carried away. We have produced a set of numbers despite the market which has been pretty lacklustre."

BPI, which makes products ranging from industrial polythenes to bags for apples and bread, upped its interim dividend by 7% from 4.2p to 4.5p.

Mr McLatchie said the company expects to report a second half similar or better to the result recorded in 2012.

He said: "Our European business very much has a first half bias but we would certainly look to see it continue to improve.

"North America has had a good first half but in actual fact its sales were behind due to some weather issues but we think we could see some recovery of volumes there in the second half.

"We should continue to see benefits coming from the UK from our operational improvements and capital investment."

Polymer prices are expected to level off in the next few years with more being made in North America and made available for export.

Mr McLatchie added: "The reason they are investing is simply down to available gas. That gas now will make it as cheap to manufacture in North America as in the Middle East.

"They are putting significant capacity into a market where we see no growth so the only place they can sell the additional capacity is export. So we would look to see cheaper product coming through."

Analysts at Investec raised their price target on BPI's shares from 600p to 635p saying the company is "trading well, despite the continuing difficult markets".