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Monday, October 25, 2021

State-backed loans to save factory bosses from surging energy prices

Steel, chemical and ceramics manufacturers hit by soaring energy prices are to be offered state-backed rescue loans in return for limiting bosses’ bonuses and dividends under plans being considered by ministers.

Kwasi Kwarteng, the Business Secretary, is understood to have submitted the proposal to the Treasury as one of several options to save energy-intensive companies from collapse in the face of rocketing wholesale gas prices.

The conditions would be based on similar terms levied on major companies that sought financial help during the pandemic through the Coronavirus Large Business Interruption Loan Scheme (CLBILS).

That scheme included curbs on dividend payments, bonuses and pay rises for senior management, and share buy-backs during the period of the loan. 

The conditions would incentivise firms to pay back the cash more quickly, it is thought. There is widespread consensus in Whitehall that any money extended to troubled firms should eventually be returned, with grants not under consideration. 

The Prime Minister is said to back Mr Kwarteng’s proposal to extend state loans to factories facing closure in order to avoid job losses. A source said that an announcement could come within days.

The former Bank of England governor Mark Carney, who is now UN Special Envoy on Climate Action and Finance, threw his support behind state support for energy users.

Speaking to City AM, he said: “We need to be predictable and credible, in terms of energy policy.

“Sometimes it is appropriate for some support, particularly for users of the energy in those sectors.”

Mr Carney signalled that the spike in wholesale gas prices, and the crisis it has precipitated for a number of industries, shows the transition towards net zero carbon emissions by 2050 needs to be “smoother rather than choppy”. 

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