Boris Johnson is preparing to sign off on a bailout worth hundreds of millions of pounds for firms at risk of collapse because of the energy crisis.
The soaring cost of gas has led to warnings of companies shutting down factories or going to the wall in a matter of weeks.
The PM last night sided with Business Secretary Kwasi Kwarteng following his extraordinary public row with Chancellor Rishi Sunak over extra funds.
Mr Johnson is said to have agreed with Mr Kwarteng that at-risk industries such as chemical, steel and paper need help.
Support will come in the form of state-backed loans rather than handouts or a price cap, which many businesses had been asking for, according to The Times.
Under the plan, companies threatened with closure would be given a government subsidy to prevent them from shutting down over the winter, and to stop thousands of jobs being lost.
The loans will only be repayable when the cost of wholesale gas returns to normal levels.
The solution comes after the Treasury denied being in talks with the Business Department, leading to fears a package of support would not be forthcoming.
In extraordinary events on Sunday, after Mr Kwarteng said he was consulting the chancellor about what help could be offered to struggling firms, treasury sources openly rejected this and accused the business secretary of ‘making things up’.
In a stinging rebuke a treasury source said: ‘This is not the first time the [business] secretary has made things up in interviews. To be crystal clear, the Treasury are not involved in any talks.’
No 10 turned up the heat last night when it backed Mr Kwarteng, insisting the Treasury had been involved in the talks.
Reports said Mr Johnson wanted to see the loan scheme put in place quickly, despite concerns from the chancellor.
After officials at Mr Kwarteng’s department held emergency talks with industry leaders, the Business Secretary submitted a proposal to Downing Street and the Treasury and was successful in staking his case.
Mr Sunak is expected to fall into line, despite being sceptical.
A government source insisted that the plan ‘isn’t about bailing out failing business’ but helping profitable companies see through the crisis, which has caused many energy firms to collapse.
‘This is a problem that industry is facing now,’ a senior Whitehall figure said.
‘There is not a huge amount of time to get this sorted before factories start shutting down and thousands of people face losing their jobs.’
Wholesale gas prices have surged by 250% since the beginning of the year, including a 70% rise since August.
The trouble stems from a global surge in demand for gas following a cold winter that left gas storage facilities depleted, plus a rebound in post-lockdown energy demand.
Russia, which provides much of the gas used by the rest of Europe, has also been accused of acting to push up prices.
The UK is also struggling because of a lack of gas storage facilities, while calmer weather has reduced the amount of electricity generated by wind power.
The government has pledged to keep the energy price cap in place to help households struggling with rising costs.
But it has up until this point refused to bailout industries, despite cries of help from bosses in some sectors that they are at risk of going under.
Industries which use a lot of energy, such as chemicals and steel, have been particularly hard hit.
The decision to back the bailout comes after a string of companies told Mr Kwarteng during meetings on Friday that they are just weeks away from shutting down production and might never reopen.
The British Ceramic Confederation, who have been involved in the government talks, indicated that progress on a rescue package has been made.
Jon Flitney, its energy and innovation manager, said: ‘We are glad to hear that the Government is considering solutions and we urge them to keep talking with the sector as the situation develops.
‘We eagerly await proposals as to how they will help ceramics companies who are grappling with soaring costs.’
UK Steel boss, Gareth Stace, said: ‘We welcome that Kwasi Kwarteng has put forward a package of measures to offer some support to energy intensive sectors.
‘What must be clear is that these reforms cannot be the only action taken.
‘We need an ambitious programme from government, a Green Steel Deal, to allow us to move towards lower carbon steelmaking. That needs to start with energy price reform, so that the UK competes on an even playing field with France and with Germany.’
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