London, 8 September 2022
The Treasury has today announced that it will partner with the Bank of England on a new scheme to offer £40 billion of financial support to energy companies facing “extraordinary liquidity requirements” due to high and volatile energy prices.
As well as passing a “rigorous” assessment process, the Treasury has said that firms will have to agree to “a wider set of conditions” to access funds, details of which will be published in due course.
Fran Boait, executive director of research and campaign group Positive Money, said:
“The EMFS will see the Bank of England creating up to £40 billion of new public money for energy companies, and is tantamount to a bailout for a sector which has enjoyed considerable profits off the back of households. At the very least the EMFS must be designed to avoid companies exploiting it for private gain, as we have seen with similar schemes rolled out by the Bank of England, such as the Covid Corporate Financing Facility (CCFF).
“It’s positive that policymakers appear to have learned the lessons of previous corporate bailout schemes, signalling that the EMFS will be priced as a ‘last resort’ and access will be subject to conditions. The terms of the scheme should ensure that beneficiaries aren’t able to use cheap funding to enrich shareholders through share buybacks and dividend payouts, and that firms are committed to decarbonisation.
“Given that we can expect volatile fossil fuel prices for the foreseeable future, it is incredibly short-termist to bail out energy companies, which socialises the risk while privatising reward. Longer term solutions such as bringing them under public ownership must be on the table.”
- HM Treasury and Bank of England to launch the Energy Markets Financing Scheme (EMFS), 8 Sept 2022: https://www.gov.uk/government/news/hm-treasury-and-bank-of-england-to-launch-the-energy-markets-financing-scheme-emfs
- ‘UK, BOE Set Up £40 Billion Liquidity Fund for Energy Traders’, Bloomberg, 8 Sept 2022: https://www.bloomberg.com/news/articles/2022-09-08/uk-treasury-and-boe-set-up-liquidity-fund-to-back-energy-trading
- The Covid Corporate Financing Facility, designed to provide the UK’s biggest corporations with access to billions of pounds in cheap loans during the pandemic, did not include social or environmental conditions. Positive Money campaigned for conditions to be added to the scheme in 2020: https://positivemoney.org/publications/ccff/
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