State-backed loans being considered for energy firms that take customers from companies that go bust

Published

3 years ago

September 21, 2021

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Some of the UK’s biggest energy companies could be offered state-backed loans in return for taking on customers from smaller suppliers if they go under, as soaring global gas prices throw the industry into crisis, the business secretary has told Sky News.

Speaking to Kay Burley, Kwasi Kwarteng also said that the carbon dioxide shortage that has affected some food and drink production could be solved by the end of the week.

Asked about the energy crisis, Mr Kwarteng said there are “lots of options” at the disposal of ministers.

“It costs a company to absorb up to hundreds of thousands of customers from another company that’s failed, that costs money, and there may well be a provision for some sort of loan and that’s been discussed,” he said.

But the business secretary stressed he did not want to be “throwing taxpayers’ money” at companies which have been “badly run”.

“Every year between five and eight companies exit the market and I don’t want to prop up failing companies, I don’t want there to be a reward for failure,” he added.

Mr Kwarteng insisted it was a “myth” that the UK supply of gas could run out and stressed “security of supply is not an issue”.

He acknowledged some people may already struggle to heat their homes because of the cost of their energy bills, but said it would not be down to a lack of supply.

Speaking in the Commons on Monday, Mr Kwarteng said there is “absolutely no question of the lights going out this winter”.

He also told MPs that the energy price cap will remain in place.

Wholesale prices for gas have increased 250% since the start of the year and there has been a 70% rise since August.

Consumers are protected from sudden price hikes by the energy price cap, but this puts pressure on suppliers as they cannot pass on the increase in wholesale gas prices to customers.

The rise has been put down to a number of factors, including a cold winter leaving stocks depleted, high demand for liquefied natural gas from Asia and a drop in supplies from Russia.

Four small UK firms have already gone bust and there are fears that others could follow suit, with energy company Bulb, which has 1.7 million customers, confirming it is seeking a bailout to stay afloat.

What happens if your energy supplier goes bust?

If a supplier fails, Ofgem will ensure customers’ gas and electricity supply continues uninterrupted.

Customers will be switched to a “supplier of last resort” and any credit with the old supplier will be transferred.

If a supplier of last resort is not possible, a special administrator would be appointed by Ofgem and the government.

Your old tariff will end and the new supplier will put you on a special “deemed” contract, which will last for as long as you want it to.

The deemed contract could cost you more, as the new supplier takes on more risk (for example, possibly having to buy extra wholesale energy at short notice to supply to the new customers), but Ofgem says it will try to get the best deal for you.

You should take meter readings as you will need to pass these on to your new supplier.

Once your new supplier has been in touch, ask them to put you on their cheapest deal. Then shop around and switch if you want to. You won’t be charged exit fees.

Turning to the issues with CO2 production, the business secretary sounded a confident note.

He said a resolution to the issues experienced was “pretty imminent” and added: “I’m very confident and hopeful that we can sort it out by the end of the week.”

“I think we have to have a diversity of sources of carbon dioxide there,” Mr Kwarteng continued.

“CF [a US company that provides 60% of Britain’s carbon dioxide and has stopped operations at two plants] isn’t the only company that manufactures carbon dioxide.

“They have a big share of the market, I said they weren’t the only one. But they are… a big part of the carbon dioxide market.”

Food producer Bernard Matthews warned Christmas dinner could be “cancelled” as a result of the stoppages at the two plants.

Carbon dioxide is crucial to the food processing industry in packaging meat products and culling animals.

Meanwhile, the chief executive of the British Meat Processors Association has warned the country could be two weeks away from seeing meat disappearing from supermarket shelves.

Business

Vodafone and Three merger could get green light, says UK’s competition watchdog

Published

4 hours ago

November 5, 2024

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Vodafone and Three merger could get green light, says UK's competition watchdog

A £15bn merger between two of the UK’s biggest mobile networks could get the green light – if they stick to their commitments to invest in the country’s infrastructure, the competition watchdog has said.

The Competition and Markets Authority (CMA) said the merger of Vodafone and Three had “the potential to be pro-competitive for the UK mobile sector”.

Announced last year, the proposed £15bn merger would bring 27 million customers together under a single provider.

The watchdog previously warned that tens of millions of mobile phone users could end up paying more if the merger went ahead.

However, the two groups recently set out plans to protect consumer pricing and boost network investment.

The CMA has now laid out a list of “remedies” required for the deal to go-ahead.

They include the networks committing to freezing certain tariffs and data plans for at least three years to protect customers from short-term price rises in the early years of the network plan.

Stuart McIntosh, chair of the inquiry group leading the investigation, said on Tuesday: “We believe this deal has the potential to be pro-competitive for the UK mobile sector if our concerns are addressed.

“Our provisional view is that binding commitments combined with short-term protections for consumers and wholesale providers would address our concerns while preserving the benefits of this merger.

“A legally binding network commitment would boost competition in the longer term and the additional measures would protect consumers and wholesale customers while the network upgrades are being rolled out.”

Today’s announcement is provisional, with a final decision due before 7 December. The inquiry group is inviting feedback on today’s announcement by 5pm on 12 November.

The CMA also published a list of potential solutions – which it called remedies – to issues it identified with the merger.

If the networks want the merger to go ahead, the watchdog requires Vodafone and Three to:

• Deliver a joint network plan to set out network upgrades and improvements over eight years;

• Commit to keeping certain existing tariff costs and data plans for at least three years to protect customers from price hikes;

• Commit to pre-agreed prices and contract terms so Mobile Virtual Network Operators (MVNOs) – mobile providers that do not own the networks they operate on – can obtain competitive wholesale deals.

Vodafone and Three are two of the biggest mobile firms in the UK, and their networks support a number of MVNOs including Asda Mobile, Lebara, Voxi, and Smarty.

Responding to the watchdog’s announcement, a spokesperson for Vodafone on behalf of the merger said: “The merger will be a catalyst for positive change.

“It will bring significant benefits to businesses and consumers throughout the UK, and it will bring advanced 5G to every school and hospital across the country.

“The merger is also closely aligned with the government’s mission to drive growth and to encourage more private investment in the UK.”

Earlier this year, Three’s chief executive hit out at the UK’s “abysmal” 5G speeds and availability as he urged regulators to approve the company’s merger with Vodafone.

Robert Finnegan noted his firm’s “cash flows have been negative since 2020 and our costs have almost doubled in five years, meaning investment in [the] network is unsustainable”.

“UK mobile networks rank an abysmal 22nd out of 25 in Europe on 5G speeds and availability, with the dysfunctional structure of the market denying us the ability to invest sustainably to fix this situation,” he added.

Business

Bosses rail at business secretary over ‘avalanche of costs’

Published

18 hours ago

November 4, 2024

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Bosses rail at business secretary over 'avalanche of costs'

Business leaders expressed frustration with ministers on Monday amid a growing budget backlash that bosses said would trigger an “avalanche of costs” and leave them with no choice but to slash investment and increase prices.

Sky News has learnt that bosses of large retail and hospitality companies and trade associations told Jonathan Reynolds, the business secretary, that last week’s budget risked damaging consumer confidence and exacerbating challenges facing the UK economy.

Among the dozens of companies represented on the call are said to have been Burger King UK, Fuller Smith & Turner, Greene King, Kingfisher and the supermarket chain Morrisons.

Mr Reynolds is said to have acknowledged that Rachel Reeves‘s inaugural fiscal statement had “asked a lot” of British business, with James Murray, the financial secretary to the Treasury, understood to have described it as “a once-in-a-generation budget”, according to several people briefed on the call.

One insider said that Nick Mackenzie, the chief executive of Greene King, had highlighted that the increase in employers’ national insurance (NI) contributions would cause “a £20m shock” to the company, while Fullers is understood to have warned that it would be forced to halve annual investment from £60m to £30m as a result of increased cost pressures.

Rami Baitieh, the Morrisons chief executive, told Mr Reynolds that the budget had exacerbated “an avalanche of costs” for businesses next year, and asked what the government could do to mitigate them.

Sources added that the CBI, the employers’ group, said its impact would be “severe”, while the British Beer & Pub Association added that there was now a disincentive to invest and flagged “a tsunami” of higher costs.

The range of comments on the call with ministers underlines the scale of discontent in the private sector about Labour’s first budget for nearly 15 years.

Only a small number of interventions during the discussion are said to have been in support of measures announced last week, with the Federation of Small Businesses understood to have praised the doubling of the employment allowance, which would see many of the smallest employers having their NI bills cut by £2,000.

The Department for Business and Trade has been contacted for comment, while none of the companies contacted by Sky News would comment.

Business

Retail giants face food price hikes dilemma after budget

Published

23 hours ago

November 4, 2024

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Retail giants face food price hikes dilemma after budget

Two of Britain’s biggest food retailers will this week face pressure to publicly disclose whether they expect a fresh spike in prices next year as the industry grapples with huge tax hikes imposed in last week’s budget.

Sky News understands that Marks & Spencer (M&S), which will unveil half-year earnings on Wednesday, and J Sainsbury, which reports interim results the following day, are collectively facing an additional bill of close to £200m as a result of changes to employers’ national insurance contributions (NICs) announced by Rachel Reeves, the chancellor.

Industry sources said the pressure on pricing would be “intense” given the thin margins on which the big supermarkets already operate.

“Food price increases from next April are inevitable,” said one.

The warning comes a day after Ms Reeves told Sky News that “businesses will now have to make a choice, whether they will absorb that through efficiency and productivity gains, whether it will be through lower profits or perhaps through lower wage growth”.

Pointedly, she did not highlight the prospect of higher prices at the tills, with some retailers now weighing whether to explicitly blame the government for impending price increases – a move which will trigger renewed inflation in the UK economy.

The grocery industry is expected to be among the hardest-hit by the changes to employer NICs, particularly after the chancellor slashed the threshold at which businesses become liable for it to just £5,000.

Tens of thousands of people employed part-time in the sector earn between that sum and the current threshold of £9,100.

The first major retailer to report financial results since the budget will be Primark’s parent, Associated British Foods (ABF), on Tuesday.

Insiders downplayed the risks of price hikes from Primark given its track record of absorbing inflationary pressures without passing them on to consumers.

ABF’s additional employer NICs bill is expected to be in the region of £25m, according to one analyst.

Overall, the retail sector could end up paying billions of pounds of additional tax given the scale of its workforce.

Ms Reeves has vowed to raise £25bn extra annually from the changes to employer NICs.

In addition to that, the rise in the national living wage will add a further burden to the financial pressures facing the retail industry.

Prior to the budget, Stuart Machin, the M&S chief executive, urged the chancellor not to increase taxes on it, calling them “a short-term, easy fix”.

“When I hear about plans to increase national insurance, a tax with no link to profit which hits bigger employers like us and our smaller suppliers, I’m concerned.

“The chancellor was right in the past to call national insurance a tax on workers.”

Jonathan Reynolds, the business secretary, will hold talks with British business leaders later on Monday about the impact of the budget.

A number of executives will be given the opportunity to ask questions on a call in which more than 100 companies are expected to be represented, although one boss who is critical of many of the budget measures said they were likely to be prevented from voicing their concerns publicly on the call.

ABF, M&S and Sainsbury’s all declined to comment.