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Tuesday, January 31, 2023

UK: PM Will Back Loans For Gas Firms Amid Fuel Crisis

According to the BBC, the Department for Business anticipates Prime Minister Boris Johnson’s support for a plan to aid energy-intensive companies as gas prices rise.

Business Secretary Kwasi Kwarteng requested the Treasury on Monday to help businesses affected by rising energy bills.

Hundreds of millions of pounds in loans might be involved in the ideas.

The Treasury is reported to be still considering the idea, while Number 10 has remained silent on the subject.

Businesses have expressed their desire for the Treasury to respond “quickly.”

Manufacturers have been forced to warn of increasing pricing for their goods as a result of rising energy expenses, which they pass on to customers.

Other businesses have expressed concern that rising gas and power prices may compel them to close their doors.

Dr. Richard Leese, head of the Energy Intensive Users Group (EIUG), told the BBC’s Today programme that a prompt reaction from the Treasury to the plans was “crucial.”

“We need to take precautionary measures to keep the problem from spreading.”

According to Dr. Leese, companies in the industry pay greater taxes and levies than their European counterparts. He said that businesses have proposed “realistic and logical” ways for assistance and disputed that government assistance would impose any more costs on taxpayers.

According to BBC political journalist Nick Eardley, there are worries among government officials that if they do nothing, companies would collapse and tens of thousands of jobs will be lost as high energy prices hit.

Any Increase In Price Will Be Met With Backlash

James Cropper PLC, a paper company in Kendal, has been in operation since 1845 and is one of the area’s largest employers.

It now also produces house insulation and carbon paper, with weekly energy costs totaling over £60,000.

“Any price rise is substantial for a factory like ours that consumes the amount of energy that we do,” its CEO, Phil Wild, told BBC Breakfast.

“As it happens, we’re probably fine here thanks to the measures we’ve taken, but I can see some of those firms failing.”

He went on to say that the recent spike in gas prices has underlined the need for energy-intensive businesses to shift away from fossil fuels and gas and toward renewable energy sources.

In the immediate term, though, he added, makers of paper, glass, steel, and ceramics “are really turning to the government for support to get them over that hump.”

Mr. Kwarteng’s official proposal comes after days of discussions with executives from impacted industries, as well as a highly public spat with the Treasury about the state of the departments’ negotiations.

Because there is a reluctance to help firms that would otherwise be competitive, our correspondent predicts that a support package will consist of loans rather than grants.

Energy-intensive sectors have increased their demands for assistance, but not all businesses are affected equally.

Others, on the other hand, do not have long-term contracts to buy energy at set rates, shielding them against short-term price spikes.

Businesses have asked for a price ceiling on energy prices, similar to how consumers already benefit from a price restriction imposed by regulator Ofgem.

However, our correspondent warns that doing so risks merely passing on the additional costs to energy providers.

Direct subsidies would increase taxpayer burdens at a time when Chancellor Rishi Sunak is anticipated to strive to reduce government spending in his upcoming Budget on October 27.

What Has Caused These High Prices?

There are several causes for this, both in the United Kingdom and across the world.

As several nations emerged from lockdown and industry reopened, there was a scarcity of gas and energy.

Last year’s severe winter in Europe put a strain on supplies, and as a result, less gas is being stored than usual.

Furthermore, the UK has fewer gas storage facilities than some other nations, which means it purchases more gas on the wholesale market and is more vulnerable to price increases.

Liquefied natural gas consumption has also grown in Asia (which has also had a chilly winter). And there’s a perception that Russia, a key gas supplier, is limiting output – an accusation it rejects – which has fueled price hikes due to supply and demand.

This has aided in the rise in gas costs in the United Kingdom, Europe, and Asia. They’ve increased by 250 percent since January. And only since August, prices have risen by 70%.

Cedric Blackwater
Cedric Blackwater
Cedric is a journalist with over a decade of experience reporting on local US news, and touching on many global topics. He is currently the lead writer for Bulletin News.

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