Soaring prices for wholesale gas could have consequences for food supplies and household bills
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Ministers could bail out struggling energy firms hit by surging wholesale gas prices amid dire warnings over the impact of the crisis on food supplies and household bills.
Business Secretary Kwasi Kwarteng is locked in crisis talks with senior industry figures for the third day running, as rising energy prices threatened to cause chaos in other industries.
Soaring prices of wholesale gas have been blamed on a number of factors, including a cold winter which left stocks depleted, high demand from Asia and a reduction in supplies from Russia.
The Government is reportedly considering offering emergency state-backed loans to firms as fears mount that small suppliers could go bust.
Some firms won’t make it to Christmas – and other companies could refuse to take on customers of collapsed firms, industry figures warned.
And food stocks could be hit in the run-up to the festive period by the crisis by shortages of carbon dioxide used for frozen products.
Two fertiliser plants in Teesside and Cheshire – which produce CO2 as a by-product – have been forced to close due to the rise in gas prices.
Industry bosses warned the country could be two weeks away from British meat disappearing from supermarket shelves due to CO2 shortages.
Foreign Office Minister James Cleverly insisted the rise in wholesale gas prices was due to the emergence from the pandemic – and said it had nothing to do with Brexit.
He did not rule out the Government stepping in to support struggling firms, and said they were “considering a range of options”.
He told Sky News the Business Secretary had held meetings with industry players which had been “very productive”.
Asked whether energy companies could be bailed out, Mr Cleverly said: “I’m not going to speculate as to exactly how we address this, but we’ve moved quickly and the Business Secretary of State’s already had a series of meetings about this both last week, and over the weekend, and we’ve got a very clear idea of what our priorities need to be in terms of protecting consumers and protecting the security of our energy supply.”
Pushed on whether he was therefore not ruling it out, he added: “We are considering a range of options.”
The industry wants the creation of a so-called “bad bank” to absorb unprofitable customers from firms that fail, according to the FT.
Mr Cleverly said: “Ultimately, what we want to do is to ensure that they stay afloat organically.
“Businesses should stay afloat through their own efforts, ideally. What we want to make sure is that we protect the integrity of our supply, we protect consumers, both commercial and residential, and we will discuss with the industry the best way of doing that.”
The surge in prices has prompted dire warnings over rising prices and shortages in shops for Brits.
CO2 shortages could become a problem in the run-up to Christmas, the managing director of Iceland supermarket said.
Richard Walker told BBC Radio 4’s Today programme that suppliers who are looking at some of the stock they hold and their just-in-time chains are suggesting this “could become a problem over the coming days and weeks”.
He said: “This is not an issue that is months away, that is for sure.
“We are building up our stocks on key lines like frozen meat just to make sure we can deal with any unforeseen issue.
“At the moment we are fully stocked and our suppliers are OK, but we do need this sorted as quickly as possible.”
Meat could disappear from supermarket shelves in just two weeks, said Nick Allen, chief executive of the British Meat Processors Association.
He told Sky News: “Those plants closed, and they account for about 60% of the CO2 produced in this country.
“They closed at very short notice with no warning. It really hit us cold.
“We’re hoping and praying the Government can negotiate with these plants to reopen. But even then, it’ll take about three days to restart.”
Mr Allen said meat manufacturers have said they have between five and 15 days’ supply left.
Dale Vince, chief executive of green energy supplier Ecotricity, warned many energy companies will not make it to Christmas and said action must be taken to remove price caps and tax on energy bills while building renewable energy “as if there’s no tomorrow”.
He told the BBC: “We’ve got a shortage of electricity at the same time there’s a global shortage of gas. You can’t fundamentally fix that, it’s a question of what sticking plasters we can apply to get through the winter. The energy market is in crisis anyway.
“Small suppliers have been going bankrupt at the rate of one in every six weeks for the last two years. There’s two kinds of energy company, those that are hedged – which means they have bought their electricity and gas going forward – and those that haven’t.
“Those that haven’t are going to go bust.”