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Hello and welcome to our continued coverage of the global economy, financial markets, euro area and business.
Britain’s energy price crisis is turning into a crisis in its own right, as the government holds emergency talks amid fears that more small suppliers will soon collapse.
Kwasi Kwarteng, the business secretary, will host a summit with gas industry leaders today as soaring market prices threaten consumers, businesses and suppliers.
As we write this morning:
Mid-tier providers will be put under administration if they run into problems this winter in a bid to protect consumers from higher bills, he revealed on Sunday, after spending a hectic weekend grappling with eventualities. of the impending gas crisis in Great Britain.
Kwarteng said small businesses would be allowed to go bankrupt with their customers auctioned off to the company willing to offer them the cheapest rate.
It is hoped that the meeting will contain the fallout caused by rising market prices, which led to a frenzied weekend of meetings and phone calls, culminating in the government’s development of plans to deal with future insolvencies. of more than 60 gas suppliers.
But the big suppliers are reportedly pushing for a major government support program to help them weather the crisis,
The Financial Time reports today that the industry wants the creation of a so-called “bad bank” to absorb unprofitable clients of failing companies – a model used during the financial crisis more than a decade ago.
They say:
Discussions with the government had focused on three different approaches, confirmed four people familiar with the situation, while stressing that the ministers were “anxious not to reward failure”.
One suggestion concerns the formation of a “bad bank” that would accept unprofitable customers from failing suppliers – a move that recalls measures taken at the height of the financial crisis in 2008 and designed to avoid weakening otherwise strong companies .
“It could get the industry through the current crisis period,” said a person familiar with the talks.
“By guaranteeing the problem at a bad bank, it would make it easier to resolve the immediate crisis and then take stock in the longer term. This would allow the government to deal with multiple failed vendors at the same time. ”
Other options could include the government taking out debt for the bigger suppliers, or for the regulator Ofgem to step in and manage the bankrupt companies, effectively putting them into nationalization.
Several small vendors have already collapsed in recent weeks as wholesale prices skyrocket, and concern grows that others may close soon.
Like my colleague Jillian ambrose writes, the majority of UK’s small energy providers could collapse this winter …
The Guardian understands that the government would rather put in place measures to protect the millions of homes that could go without a supplier this winter rather than support poorly funded businesses that risk going bankrupt.
A leading industry source said the government was “not interested in bailing out mismanaged businesses” and may let the industry experience a “natural response” to the ongoing crisis.
The customers of these companies would be transferred to another supplier. But they are not keen on taking these clients because they may be on unprofitable contracts given the current rising wholesale costs.
The energy crisis forced several UK fertilizer companies to halt their work last week. This has disrupted the supply of carbon dioxide (CO2 being a byproduct of the fertilizer process), which now threatens the UK food supply chain, as CO2 is used to stun animals in slaughterhouses, as well. than in packaged foods, soft drinks and ready meals.
If the crisis worsens, UK farmers could be forced to slaughter pigs:
Soaring energy prices are also a factor weighing on global markets, where stock prices have retreated in recent weeks.
Higher energy costs will drive up costs, undermine profitability, dampen growth and fuel inflation. An unattractive combination. Stocks have fallen in Asia-Pacific markets and we are looking at losses in Europe and on Wall Street.
IGSquawk
(@IGSquawk)#DOW 34,234 -1.01%#SPX 4,395 -0.82%#NASDAQ 15,232 -0.66%#RUSSELL 2207 -1.05%#CROC 7210 -0.74%
We will be following all the action throughout the day ….
Agenda
- 7am BST: German producer prices for August
- 3 p.m. BST: NAHB US Homebuilders Housing Market Index
- 3.15 p.m. BST: Treasury Committee hearing on jobs, growth and productivity
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