Why are so many energy companies in the UK going bankrupt?

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Why are so many energy companies in the UK going bankrupt?

The UK’s residential energy providers have been hit by a string of bankruptcies in recent months, with Bulb being the most recent to go dark this week.

Since August, the number of UK suppliers has nearly halved, owing to sky-high worldwide wholesale costs — as well as local issues such as the so-called energy cap.

As the chilly winter approaches, rising fuel costs are translating into rising inflation, making it more difficult to pass on spiraling expenses to consumers.

Since August, a total of 25 British suppliers have gone bankrupt due to rising wholesale gas and electricity rates.

According to regulator Ofgem, only 28 companies have survived the precipitous decline.

Bulb, the country’s seventh-largest provider, went bankrupt on Monday, necessitating special assistance to save the 1.7 million households it serves.

Bulb will be kept on by the government, which has set aside nearly?1.7 billion ($2.3 billion, 2.0 billion euros).

Customers from other failed suppliers have been taken on by larger competitors through a separate bankruptcy process.

Analysts believe that consumers would ultimately pay through higher gasoline prices, which will disproportionately affect the poorest households.

Energy prices have soared in Europe as a result of rebounding post-pandemic demand, the arrival of the colder northern hemisphere winter, and persistent fears about vital Russian supply.

In France and Germany, some suppliers have gone bankrupt or reorganized their operations.

However, due to its larger reliance on natural gas and insufficient gas storage facilities, the United Kingdom is more vulnerable.

Meanwhile, the government is attempting to increase renewable and nuclear electricity in order to reach its 2050 net-zero-carbon goal.

However, recent calm weather has limited output from the country’s burgeoning wind industry.

“The United Kingdom is more reliant on gas for power generation than many European countries, and it is also less connected into a transnational energy market,” said Veronika Grimm, an economist at Friedrich-Alexander University in Nuremberg.

“Price hikes in Europe, for example, were eased by the unified electrical market — but the costs were clearly high here, too,” she told AFP.

Experts have pointed to the liberalization of Europe’s domestic energy market in recent decades, particularly in the United Kingdom in the 1990s, as a crucial element in the upheaval.

This sparked competition and attracted a slew of new smaller players who had the financial power to withstand the sky-high wholesale expenses on a long-term basis.

“There’s been a lot of emphasis on competitiveness and market entry,” Grimm noted.

“Currently, many small businesses in the market are unable to cope with temporary challenges such as. The Washington Newsday Brief News is a daily newspaper published in Washington, D.C.

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