Meat processors had warned they too would need to halt production in days, with gaps soon to appear on supermarket shelves, if production did not resume, because CO2 is used to stun animals for slaughter and preserve the shelf life of meat.
British Business Secretary Kwasi Kwarteng said on Tuesday that the short-term financial agreement with CF Fertilisers will allow the company to immediately restart operations and produce CO2 at its Billingham plant.
The agreement with the company will last for three weeks whilst the CO2 market adapts to the global gas prices, the business secretary said in a statement.
CF Industries Holdings said in a statement it is immediately restarting the ammonia plant at its Billingham plant after reaching an interim agreement with the UK government to cover the costs and restart the plant to produce CO2 for the British market.
CO2 is a byproduct of the fertiliser that is produced by CF Industries which has two plants in northern England.
Kwarteng met the CF Industries boss, Tony Will, on Sunday, and had told broadcasters earlier on Tuesday that the government could provide financial support to get production started again.
British Prime Minister Boris Johnson said earlier in New York that the government would do what was necessary to get production up and running again, potentially opening ministers up to other pleas for help from heavy industry that is struggling with record energy prices.
The soaring price of wholesale gas has also prompted several small energy providers to collapse, and it was starting to have a knock-on impact on the food industry.
CO2 is used in the vacuum packing of food products to extend their shelf life, to put the fizz into beer, cider and soft drinks and to help with food deliveries in the solid form of dry ice.
A shortage of the gas had compounded the acute shortage of truck drivers in Britain, which has also caused delays and been blamed on the impact of COVID-19 and Brexit.
Andrew Opie of the British Retail Consortium welcomed the news. "It is vital that production at the (two UK plants) is restarted as soon as possible, and distributed quickly to food manufacturers in need of it," he said.
(Reporting by Kate Holton and James Davey in London and Sabahatjahan Contractor in BengaluruEditing by Marguerita Choy and Matthew Lewis)