Insight

Robert Peston: Government bailout of energy industry will cost billions

The government is holding talks with the energy industry aimed at keeping as many firms afloat as possible. Credit: PA

I cannot see how even cheap government loans are remotely going to fix this problem of crashing energy companies.

This is because the fundamental problem facing firms is that energy customers are massively loss making for suppliers that haven’t hedged their gas supply commitments.

That’s true for those businesses failing now and any big company that might take on those stranded customers.



So why would big companies ride to the rescue? I can’t see it. Unless, that is, government were to legislate to allow the price cap next spring to rise way beyond even the current doubling in market prices, such that today’s losses were offset by tomorrow’s super profits.

But that would crush living standards and be politically disastrous for the Tories.

So one way or another this government is going to end up pumping billions of pounds of subsidies - our money - into the energy supply industry.

It is yet another serious market failure. And yet another chance for Boris Johnson to redefine the Tories as the party of huge public spending and market intervention. What strange times.