Bleak’ outlook for small British energy firms amid gas price rises

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British economy
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The British government wants energy firms to “stay afloat organically”, a Cabinet minister has said, as the growing energy crisis led to company bosses saying the outlook was “looking bleak”.

Wholesale prices for gas have surged 250 per cent since January – with a 70-per-cent rise since August alone, leading to calls for support from the industry.

Business Secretary Kwasi Kwarteng is holding a fresh round of crisis talks with the energy industry on Monday amid fears more small suppliers could go to the wall.

But while industry leaders said more needed to be done, Foreign Office minister James Cleverly would not confirm which measures could be taken.

Kwarteng previously said consumers would be protected from sudden price hikes through the government’s energy price cap.

However that puts pressure on the suppliers – particularly smaller companies – who are unable to pass on the increases in wholesale gas prices to their customers.

Four firms have already folded and there are fears that more could follow.

Some analysts have reportedly predicted that Britain’s energy companies could be reduced to three-quarters over the coming months leaving as few as 10.
On Monday, Peter McGirr, chief executive of small energy firm Green, said “the outlook is looking bleak”.

McGirr told the BBC’s Today programme: “It is not that I have a bad business model or I have a bad business.

“We just don’t have as deep pockets to keep going through this crisis. I think that all suppliers are feeling the pinch of this but some of them just have a lot deeper pockets to try and ride out the storm.”

He said: “I feel that without any support mechanism being put in place by government, it’s unlikely we will see the winter through.”
But Cleverly said he was “not going to speculate” over whether the government would step in.

Pushed on whether he was therefore not ruling out the government bailing out firms, he added: “We are considering a range of options.”
But he said the government wanted energy firms to “stay afloat organically”.

Speaking to BBC Breakfast, he said: “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 rise in gas prices has been blamed on a number of factors, including a cold winter which left stocks depleted, high demand for liquefied natural gas from Asia and a reduction in supplies from Russia.

Cleverly said the shortage was due to the pandemic, and told Good Morning Britain: “Because the global economy is kind of waking up from this hiatus imposed upon us by Covid, we’re suddenly seeing a surge in demand and therefore surging gas prices that has affected all kinds of parts of the economy, it has had an impact on food production and we are looking to ensure that we protect those food suppliers.”

However Emma Pinchbeck, head of Energy UK, a trade association for the energy industry, told Times Radio the issue could not be blamed on one factor.

Speaking to broadcasters on the tarmac of New York’s JFK airport overnight, Prime Minister Boris Johnson said: “I think people should be reassured in the sense that yes there are a lot of short-term problems not just in our country, the UK, but around the world caused by gas supplies and shortages of all kinds.

“This is really a function of the world economy waking up after Covid.

“We’ve got to try and fix it as fast as we can, make sure we have the supplies we want, make sure we don’t allow the companies we rely on to go under. We’ll have to do everything we can.

“But this will get better as the market starts to sort itself out, as the world economy gets back on its feet.”

At the same time ministers are grappling with warnings of potential shortages on the shelves as the knock-on effect of the gas price rise ripples through the economy.

Producers have warned that supplies of meat, poultry and fizzy drinks could all be hit due to a shortage of carbon dioxide (CO2).

It follows the shutting down of two large fertiliser plants in Teesside and Cheshire – which produce CO2 as a by-product – with the owners citing the increase in gas prices.

Nick Allen, chief executive of the British Meat Processors Association, has said the country could be two weeks away from British meat disappearing from supermarket shelves.

Allen told Sky News said meat manufacturers have said they have between five and 15 days’ supply left.

Cleverly said: “We’ll continue working with the sector to ensure that there is food on the table and gas in the pipes and that will remain a priority for government.”

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