So we'll be bailing out the big energy companies if they crash: how likely is it anyway?

Keeping the flame alive.

As part of a team building exercise in my previous workplace, I once tried tight rope walking. Just to make the experience more exciting, I decided to do the dead-fall – something I had mastered at theatre workshops while in university – knowing there was a safety net below to catch me.

Had it not been for that safety net, I would have never tight rope walked in the first place – leave alone try the crowd pleasing antic. But my risky decision didn’t harm me or anyone around me.

Under a revised plan drawn up by the Government to avoid “market chaos”, UK consumers may be on the hook for a £4bn safety net if any of the six leading energy suppliers see a downfall.

Energy secretary Ed Davey is looking at a quick intervention with “adequate protection” if any of the ‘Big Six’ go out of business. Fair enough, but is it?

In a capitalist society such as the one we live in today, is it morally correct to ensure a safety net for corporates – such as big energy companies – to take risky decisions that could negatively affect millions in the UK market?

If the government is worried about any of these companies going out of business, the one thing it should not do is make it clear that it would be bailed out in case it does crash – providing the company with almost an incentive not to work towards keeping itself afloat.

The Big Six in the UK energy sector refer to German-owned E.On, Npower with its German parent company (RWE), France’s EDF, British Gas, Scottish and Southern Energy (SSE) and Scottish Power.

Competition is imperative to a company performing well. A safety net only reduces the need or will to compete.

A big energy company crashing would be unlike the crash of the banking sector where the crisis risked consumers losing their lives’ savings and government bail outs were imperative.

If a big energy company does go bust, the way it would affect a regular householder would be to find a new energy supplier. Would it be any more complicated than that? Why not let the private sector undertake the rescue?

Half of the Big Six are foreign owned companies, and it could perhaps make sense to draw up plans for the government to separate UK subsidiaries from foreign parents.

However, what are the chances of a big energy company on the whole going under in the first place? Highly unlikely – as Ed Davey himself accepts. Could this be anything more than a threat of nationalisation?

In January this year, a new survey by uSwitch found significant differences between satisfaction in the UK with smaller energy suppliers and the ‘Big Six’. EDF and Npower ranked at the bottom of the survey while Good Energy, the UK’s only 100 per cent renewable energy company, owned top spot.

Of the "Big Six", only two – E.ON and SSE – came in the top ten, sharing ninth place, whereas British Gas and ScottishPower came joint 11th.

Is it really justified, then, that consumers collectively face higher costs and pay up to almost £4bn to save any of the "Big Six" crashing when the satisfaction levels may not be up to mark?

Some may argue it will be better if the costs of the bail out came out of the profits of the energy firms instead of heightening the prices for householders. But ultimately it would amount to the same thing.

Albert Camus said all that he knew about morality and obligations he owed to football. Taking his cue, one thing we do know about the rules of any game is winning –not losing – should be rewarded. By that respect, the Big Six should fight to keep their heads up in stormy times instead of looking for that parachute they know the government is already making for them. And an expensive one at that.  

Photograph: Getty Images

Meghna Mukerjee is a reporter at Retail Banker International

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Arsène Wenger: how can an intelligent manager preside over such a hollowed-out team?

The Arsenal manager faces a frustrating legacy.

Sport is obviously not all about winning, but it is about justified hope. That ­distinction has provided, until recently, a serious defence of Arsène Wenger’s Act II – the losing part. Arsenal haven’t won anything big for 13 years. But they have been close enough (and this is a personal view) to sustain the experience of investing emotionally in the story. Hope turning to disappointment is fine. It’s when the hope goes, that’s the problem.

Defeat takes many forms. In both 2010 and 2011, Arsenal lost over two legs to Barcelona in the Champions League. Yet these were rich and rewarding sporting experiences. In the two London fixtures of those ties, Arsenal drew 2-2 and won 2-1 against the most dazzling team in the world. Those nights reinvigorated my pride in sport. The Emirates Stadium had the best show in town. Defeat, when it arrived in Barcelona, was softened by gratitude. We’d been entertained, more than entertained.

Arsenal’s 5-1 surrender to Bayern Munich on 15 February was very different. In this capitulation by instalments, the fascination was macabre rather than dramatic. Having long given up on discerning signs of life, we began the post-mortem mid-match. As we pored over the entrails, the curiosity lay in the extent of the malady that had brought down the body. The same question, over and over: how could such an intelligent, deep-thinking manager preside over a hollowed-out team? How could failings so obvious to outsiders, the absence of steel and resilience, evade the judgement of the boss?

There is a saying in rugby union that forwards (the hard men) determine who wins, and the backs (the glamour boys) decide by how much. Here is a footballing equivalent: midfielders define matches, attacking players adorn them and defenders get the blame. Yet Arsenal’s players as good as vacated the midfield. It is hard to judge how well Bayern’s playmakers performed because they were operating in a vacuum; it looked like a morale-boosting training-ground drill, free from the annoying presence of opponents.

I have always been suspicious of the ­default English critique which posits that mentally fragile teams can be turned around by licensed on-field violence – a good kicking, basically. Sporting “character” takes many forms; physical assertiveness is only one dimension.

Still, it remains baffling, Wenger’s blind spot. He indulges artistry, especially the mercurial Mesut Özil, beyond the point where it serves the player. Yet he won’t protect the magicians by surrounding them with effective but down-to-earth talents. It has become a diet of collapsing soufflés.

What held back Wenger from buying the linchpin midfielder he has lacked for many years? Money is only part of the explanation. All added up, Arsenal do spend: their collective wage bill is the fourth-highest in the League. But Wenger has always been reluctant to lavish cash on a single star player, let alone a steely one. Rather two nice players than one great one.

The power of habit has become debilitating. Like a wealthy but conservative shopper who keeps going back to the same clothes shop, Wenger habituates the same strata of the transfer market. When he can’t get what he needs, he’s happy to come back home with something he’s already got, ­usually an elegant midfielder, tidy passer, gets bounced in big games, prone to going missing. Another button-down blue shirt for a drawer that is well stuffed.

It is almost universally accepted that, as a business, Arsenal are England’s leading club. Where their rivals rely on bailouts from oligarchs or highly leveraged debt, Arsenal took tough choices early and now appear financially secure – helped by their manager’s ability to engineer qualification for the Champions League every season while avoiding excessive transfer costs. Does that count for anything?

After the financial crisis, I had a revealing conversation with the owner of a private bank that had sailed through the turmoil. Being cautious and Swiss, he explained, he had always kept more capital reserves than the norm. As a result, the bank had made less money in boom years. “If I’d been a normal chief executive, I’d have been fired by the board,” he said. Instead, when the economic winds turned, he was much better placed than more bullish rivals. As a competitive strategy, his winning hand was only laid bare by the arrival of harder times.

In football, however, the crash never came. We all wrote that football’s insane spending couldn’t go on but the pace has only quickened. Even the Premier League’s bosses confessed to being surprised by the last extravagant round of television deals – the cash that eventually flows into the hands of managers and then the pockets of players and their agents.

By refusing to splash out on the players he needed, whatever the cost, Wenger was hedged for a downturn that never arrived.

What an irony it would be if football’s bust comes after he has departed. Imagine the scenario. The oligarchs move on, finding fresh ways of achieving fame, respectability and the protection achieved by entering the English establishment. The clubs loaded with debt are forced to cut their spending. Arsenal, benefiting from their solid business model, sail into an outright lead, mopping up star talent and trophies all round.

It’s often said that Wenger – early to invest in data analytics and worldwide scouts; a pioneer of player fitness and lifestyle – was overtaken by imitators. There is a second dimension to the question of time and circumstance. He helped to create and build Arsenal’s off-field robustness, even though football’s crazy economics haven’t yet proved its underlying value.

If the wind turns, Arsène Wenger may face a frustrating legacy: yesterday’s man and yet twice ahead of his time. 

Ed Smith is a journalist and author, most recently of Luck. He is a former professional cricketer and played for both Middlesex and England.

This article first appeared in the 24 February 2017 issue of the New Statesman, The world after Brexit