The government is accelerating contingency plans for the collapse of Bulb, Britain's seventh-biggest domestic energy supplier - a demise that would mark by far the biggest insolvency of the crisis engulfing the sector.

Sky News has learnt that ministers and officials, along with the industry regulator Ofgem, believe that Bulb - which has around 1.7 million household customers - could collapse as soon as next week, amid diminishing expectations of a rescue deal.

Industry sources said on Friday that talks with a small number of potential buyers were ongoing, but that others had pulled out in recent days.

A solvent rescue remains a possibility, they said, but added that it was highly unlikely that Bulb could survive through November without new funding.

Ovo Energy, Octopus Energy, and Shell Energy Retail are among the rival gas and electricity groups which have had access to Bulb's financial data in recent weeks.

An executive at one of the companies which had explored a takeover of Bulb said it had liabilities of approximately £600m, making a solvent takeover of the company hard to envisage given the backdrop of wholesale price volatility.

A Bulb spokesperson said on Friday: "Our discussions with multiple parties to secure additional funding continue to make good progress and we're encouraged by the drop in wholesale energy prices.

"We expect the government to monitor wholesale prices and their effect on the whole industry, but ministers and Ofgem have been clear we must emerge from the energy crisis with a competitive and innovative market, rather than a return to the oligopoly of the past."

Lazard, the investment bank, has been engaged in the search for new funding, while AlixPartners, an advisory firm, has been working with Bulb on short-term measures to strengthen its balance sheet.

If Bulb does collapse, it would place at risk the jobs of roughly 1,000 people who work for the company, which was launched in 2015 by Amit Gudka and Hayden Wood, and has accumulated a 6% share of the market.

It supplies 100% renewable electricity and 100% carbon-neutral gas, which would make its failure around the time of the crucial COP26 climate summit in Glasgow a more acute headache for the government.

Its demise would also render the shareholdings of executives and their venture capital backers largely worthless.

The latest developments in Bulb's rescue efforts pave the way for the inaugural use of a resolution process called the Special Administration Regime (SAR), which would guarantee funding for Bulb from the Treasury while administrators seek a restructuring deal, buyer, or transfer of the customer base.

The demise of Bulb would come close to matching the size of the total customer bases of the 14 energy companies which have ceased trading since the beginning of August.

The largest of those, Avro Energy, had about 580,000 customers.

If the search for a buyer does prove unsuccessful, the Department for Business, Energy and Industrial Strategy, alongside Ofgem, would initially consider whether Bulb can be dealt with through the watchdog's Supplier of Last Resort (SOLR) process.

Under that, a company's operating licence is removed and bids are sought from other industry players for its customer base, with losses incurred by the acquirers of those customers are then recouped through an industry levy.

Bulb is, however, regarded by most observers as too large for any single supplier to take on through the SOLR system, meaning that invoking the SAR is now viewed as probable by industry executives.

Under the SAR, the administrator has a legal duty to consider the interest of customers, unlike a conventional insolvency process where the primary duty is to creditors.

Sky News revealed last month that Ofgem had lined up Teneo Restructuring, an advisory firm, to be on standby for the collapse of a large energy company.

In a statement on its website about SAR, Ofgem said a memorandum of understanding had been drawn up between itself, the Treasury, and BEIS, adding: "Provisions for this administration scheme for energy suppliers were included in the 2011 Energy Act.

"It has never been used before because a large energy supplier has never been insolvent."

A government spokesman said on Friday: "Ofgem - as the expert regulator - is monitoring the situation across the energy market for the continued impacts on high worldwide wholesale gas prices.

"We have put in place the powers and robust processes to ensure customers do not experience any disruption to their energy supply and that costs are minimised if a supplier should exit the market."

The regulator added: "There has been an unprecedented increase in global gas prices which is putting financial pressure on suppliers.

"We know this is a worrying time for many people and our number one priority is protecting customers.

"In the event a supplier fails, Ofgem and government have robust processes in place to ensure customers' electricity and gas supply continue and domestic customers' credit balances are protected."

Many of Bulb's customers could face higher bills because wholesale prices have soared in recent months, although they have begun to fall again.

In total, about two million households have seen their supplier cease trading since the summer, sparking demands from some executives for a removal of the industry price cap or a bailout fund to help with the rescue of smaller suppliers.

Kwasi Kwarteng, the business secretary, has rejected both demands.

On Friday, Ofgem said it would consult on changes to the price cap because the ongoing industry crisis had "changed the perception of risk and uncertainty in this market".

The collapse of one of the biggest challengers to the big players - the largest of which are Centrica's British Gas, E.ON Next, EDF Energy, Scottish Power and Ovo Energy, which acquired SSE's retail business - would be a blow to hopes of a more varied and competitive market.

Octopus Energy, which like Bulb supplies 100% renewable energy, has established itself as an independent, well-funded challenger and now boasts 2.5 million customers across more than four million accounts.