Gas price crisis: PM expected to back millions in bailout loans for industry

·3 min read
Prime minister Boris Johnson is said to be behind a plan to prop up struggling energy industry. Photo: PA
Prime minister Boris Johnson is said to be behind a plan to prop up struggling energy industry. Photo: PA

Prime minister Boris Johnson is reportedly gearing up to offer struggling businesses in gas-intensive industries a support package, as energy prices soar. 

The BBC and FT reported that the Department for Business is expecting new measures, with the Treasury looking at proposals. 

Business secretary Kwasi Kwarteng asked the Treasury to support firms on Monday as production at gas-intensive industries, such as the steel and concrete sectors, threatens to grind to a standstill. 

The proposals may include loans totalling hundreds of millions of pounds. 

A spokesperson for the Department for Business, Energy and Industrial Strategy (BEIS) said: “Ministers and officials continue to engage constructively with industry to further understand and to help mitigate the impacts of high global gas prices. Our priority is to ensure costs are managed and supplies of energy are maintained.”

Yahoo Finance UK also contacted the Treasury and Cabinet Office for comment. 

Crippling energy costs have forced manufacturers to warn of knock-on higher costs for goods. Some have moved to shut down factories and plants as it is uneconomical to continue to produce under current conditions. 

A source close to the chancellor told the FT that Sunak has an "open mind" on the issue. 

Read more: Sunak likely to have 'little money for public services' despite tax rises

The issues extend beyond just industry. Last week, the National Grid (NG.L) issued a stark warning that the UK is facing a greater threat of blackouts this winter, as well as tight electricity supplies.

The company’s electricity system operator (ESO) said Britain’s infrastructure will be able to get enough gas to see it through the winter period, but cut its forecast of buffer supply.

Around half of the country’s gas demand is used to heat homes, while another quarter is used to generate electricity.

National Grid oversees the country's energy supply, and ensures supply and demand are evenly balanced. The ESO is a legally separate business within National Grid.

In recent weeks, nine small energy suppliers have gone bust amid soaring energy prices.

Enstroga, Igloo Energy and Symbio Energy went bust at the end of September. The others included People’s Energy, Green Supplier Ltd, Utility Point, PfP Energy, MoneyPlus Energy and Avro Energy.

Wholesale gas prices have already surged more than six-fold, while the price cap on energy bills has risen £139 ($188) to £1,277. Experts have predicted that it could rise by another almost £400 in April.

According to research firm Cornwall Insight, energy bills could climb by as much as 30% next year if gas and electricity prices continue to rise, and more suppliers go under. It expects the energy price cap to increase to around £1,660.

Reasons behind the dramatic increase in power prices include low gas reserves, strong commodity and carbon prices, heightened global demand, and low wind output.

Watch: Energy crisis: Boris Johnson reportedly backs multi-million pound plan to support businesses

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting