Thirty metres from the kiln the heat is palpable. It is converting crushed stone to "clinker" for cement at temperatures of 1,500°C.

It was designed to burn pulverised coal.

But rising coal prices have prompted Castle Cement, a unit of Germany's Heidelberg Cement, to replace over half the coal with alternatives - tyres, bone meal, paper.

Across Europe, companies are suffering under high energy costs. Oil hit a record high above $140 per barrel on Thursday.

"We've had to increase our use of secondary fuels such as whole tyres, meat and bone meal, paper and plastics and recycled solvents," said Gareth Price, general manager of the Ketton works.

"This keeps our costs down and also reduces the amount of waste going to landfill."

Beyond the 68 metre-long steel tube of the furnace, an enormous cylindrical mill grinds 130 tonnes of clinker an hour to a fine powder with a deafening rumble.

It runs on electricity, which cannot be replaced with other fuels, and power prices have more than doubled in the past year.

With a collapse in British house building following the credit crunch, the company's ability to pass costs onto customers is limited, putting pressure on the bottom line.

Castle Cement is not alone in feeling the pressure.

Shares in the world's top paper and packaging firms Stora Enso Oyj, UPM-Kymmene, and Huhtamaki, fell sharply earlier this month when the Finnish firms were forced to issue profit warnings on the back of higher energy costs.

Companies in all sectors, from food makers such as Cadbury in the UK to Austria's RHI, the world's largest fire proof material maker, have warned that higher oil, gas, coal and power prices are pushing up the costs of manufacturing products and moving them to customers.

Industry says the situation has reached a tipping point and urgent action is needed from the EU and governments to avoid business closures and job losses.

"The real pain is kicking in," David Gilett, director of IFIEC Europe, a lobby group for energy intensive industries across Europe, said.

"If the forward prices for winter power and gas apply when it comes around to actually buying the power and gas, then there will be real difficulties."

Crude, coal and gas prices have risen globally in recent years but businesses in Europe feel they have suffered more than other regions.

Mr Gilett noted that many countries subsidise energy prices, especially in Asia and the Middle East.

In the US, power and gas prices are often lower than those in liberalised western European markets.

In the past nine months benchmark UK gas prices have been 20-30 per cent above US Henry Hub prices, according to data from oil giant BP Plc.