Energy companies seek help amid price crunch; Fears of inflation accompanied by stagflation hit the markets | a job

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Good morning, and welcome to our renewed coverage of the global economy, financial markets, the eurozone and business.

Britain’s energy price crisis is turning into a full-blown crisis, as the government holds emergency talks amid fears that more small suppliers may soon collapse.

Kwasi Quarting, Minister of Business, will hold a summit with the heads of the gas industry today, as rising market prices threaten consumers, businesses and suppliers.

As we write this morning:

It was revealed on Sunday that mid-level suppliers will be put into management if they get into trouble this winter in a bid to protect consumers from more expensive bills, after a frantic weekend in the emergency response to Britain’s looming gas crisis.

It will allow small businesses to go bankrupt, Kwarteng said, with its customers auctioning off the company willing to offer them the cheapest price.

The meeting will hopefully contain the fallout from higher market prices, which led to a frantic weekend of meetings and phone calls, culminating in the government making plans to deal with future bankruptcies among the 60-plus gas suppliers.

But major suppliers are said to be pushing for a large government support package to help them through the crisis.

The Financial Times reported today that the industry wants to create a so-called “bad bank” to absorb unprofitable clients from companies that fail – a model used in the financial crisis more than a decade ago.

They say:

Talks with the government focused on three different approaches, and four people familiar with the situation confirmed that ministers were “careful not to reward failure.”

One suggestion is to form a “bad bank” that deals with unprofitable customers from failed suppliers — a move reminiscent of measures taken at the height of the financial crisis in 2008 and one designed to avoid undermining otherwise powerful companies.

“This industry may pass through the current crisis period,” said one of the people familiar with the conversations.

By stopping the problem in a troubled bank, it will make it easier to solve the immediate crisis and then evaluate it in the long term. It will allow the government to deal with many suppliers going bankrupt at the same time.”

Other options could include government debt to underwrite to larger suppliers, or regulator Ofgem to step in and manage failing companies, effectively putting them into nationalization.

Several small suppliers have already collapsed in recent weeks as wholesale prices have soared, and concern is growing that more may stop working soon.

As my colleague Gillian Ambrose has written, the majority of the UK’s small energy suppliers could be left to collapse this winter…

The Guardian understands that the government would rather make arrangements to protect the millions of homes that might be left without a resource this winter than support poorly funded companies that are likely to fail.

A senior industry source said the government was “not interested in bailing out poorly managed companies” and might leave the sector to experience a “natural response” to the worsening crisis.

Customers of those companies will be transferred to another supplier. But they are not keen on attracting these customers, they may be on unprofitable contracts given the current jump in wholesale costs.

The energy crisis forced several UK fertilizer companies to suspend operations last week. This disrupted the supply of carbon dioxide (CO2 is a by-product of the fertilizer process), which now threatens the UK food supply chain, as carbon dioxide is used to electrocute animals in slaughterhouses, as well as in packaged foods, soft drinks and ready meals.

If the crisis worsens, British farmers may have to cull pigs:

Rising energy prices is also one of the factors affecting global markets, with stock prices plummeting again in recent weeks.

Higher energy costs will raise costs, undermine profitability, disrupt growth and increase inflation. Unattractive combination. Stocks fell in the Asia-Pacific markets, we look forward to losses in Europe and Wall Street.

IGSquawk (IGSquawk)

#DOW 34234 -1.01% #SPX 4395 -0.82% #NASDAQ 15232 -0.66% #RUSSELL 2207 -1.05% #FANG 7210 -0.74%

September 20 2021

We will keep track of all events during the day….

Agenda 7am GMT: German Producer Prices at 3pm GMT: NAHB Housing Market Index for US homebuilders 3.15pm GMT: Treasury Committee hearing on jobs, growth and productivity.

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