Fuel poverty warning as energy price cap goes up at time of ‘chaos’ for economy

Published

3 years ago

September 30, 2021

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A 12% rise in the energy price cap has taken effect amid warnings further increases are inevitable in the months ahead as wholesale costs surge in a time of “chaos” for the wider economy.

Labour, which has claimed a “winter of discontent” looms, accused the government of complacency over “the fuel crisis, energy costs crisis, and supply chain crisis” – factors all being blamed for adding to consumer and business costs.

The price cap shift will affect more than 15 million households stuck on so-called default tariffs – price plans for gas and electricity provision that are automatically charged to those who fail to switch or select fixed-rate deals.

The cap is rising by £139 to £1,277 while prepayment customers will see an increase of £153 to £1,309.

Ofgem, the industry regulator which is charged with making the cap fair for suppliers and customers alike, said at the time of its price cap review in August that the hike reflected a 50% increase in wholesale energy costs over the past six months.

However, industry experts have warned that another leap is likely to be imposed from April – when the next review is due to take effect – as wholesale gas costs for next-month delivery have only accelerated.

Figures from industry analytics firm ICIS this week showed an increase of more than 600% over 12 months.

Contracts for delivery in March are currently at levels just below those for November.

The rocketing sums prompted senior economist at the Resolution Foundation, Jonny Marshall, to declare that “another big rise” in the price cap lay ahead.

“There is little respite in sight for energy bills going up and up and up,” he told Sky News.

The unprecedented and staggering pace of the increases as the weather turns have been blamed for the deluge of small energy company failures – 10 of them last month alone – as their business models leave them at the mercy of near-term price spikes.

The reasons for the record price levels are many and complex but can be largely put down to global supply issues as economies get back in gear following COVID-19 disruption.

A cold end to last winter in Europe left gas stocks lower than usual and competition for raw energy more widely has intensified globally with China, the world’s second-largest economy, experiencing blackouts.

In the UK, a lack of wind generation and even a fire in Kent last month have been blamed as contributing factors.

The spike in power prices has forced attention on the impact on households amid warnings that higher energy bills will combine with the loss of government aid packages to leave millions of families facing hardship.

Data from the campaign group End Fuel Poverty Coalition suggested the rise in the price cap alone would see the numbers in fuel poverty in England rise to an estimated 4.1 million.

Its research identified Barking & Dagenham, Stoke-on-Trent, Newham, Shropshire, Herefordshire and King’s Lynn and West Norfolk as fuel poverty “coldspots”.

A report by Citizens Advice on Thursday said the poorest households could lose £37.40 a week as energy company failures coincided with the end of the pandemic-driven £20 Universal Credit uplift and furlough scheme.

Consumer groups say the best way for energy customers to protect themselves from rising gas and electricity bills is to review their tariff and shop around but, given the scale of the wholesale price increases, some admit the price cap could prove the best defence in the short term as suppliers are forced to pay record sums in the current market.

The ability to afford the cost of a break or evening out is also shrinking as a temporary cut in VAT to help hospitality and tourism businesses recover from the pandemic has been partly withdrawn – rising from 5% to 12.5%.

All this as the economy battles a record worker shortage in the wake of Brexit with the 100,000 shortfall in HGV drivers raising costs in the supply chain and contributing to the current fuel delivery crisis that has seen many forecourts sucked dry by panic-buyers.

The Bank of England expects the rate of inflation to surge from its current level of 3.2% to beyond 4% by the end of the year – with governor Andrew Bailey admitting this week that the economy faced “hard yards” ahead.

Critics of the government have accused ministers of sleepwalking into the price crisis and demanded more intervention.

Labour declared that the new £500m household support fund for England, revealed on Thursday, was a “temporary and inadequate sticking plaster” as families grapple challenges on many fronts.

Shadow business secretary Ed Miliband said: “We are in desperate need of leadership to contain this chaos.

“It is Conservative complacency that has led to the fuel crisis, energy costs crisis, and supply chain crisis our country is experiencing, with ministers ignoring warnings from businesses and failing to plan ahead.”

He added: “Ministers are blaming the public and failing to acknowledge the scale of the problem.

“We need to make Brexit work, and that starts with addressing the huge shortfall of HGV drivers that is causing mayhem in our supply chains.”

A spokesperson from the Department for Business, Energy and Industrial Strategy said: “The energy price cap is shielding millions of customers from rising global gas prices. Even with today’s planned increase, the cap still saves households up to £100 a year and is in addition to wider support for vulnerable, elderly and low-income households.

“Earlier this week we announced a new £500m Household Support Fund which will help those in greatest need with the cost of essentials over the coming months – and families will continue to benefit from Winter Fuel Payments, Cold Weather Payments and the Warm Home Discount, which is being increased to £150 and extended to cover an extra 750,000 households.”

Business

Vodafone and Three merger could get green light, says UK’s competition watchdog

Published

7 hours ago

November 5, 2024

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Vodafone and Three merger could get green light, says UK's competition watchdog

A £15bn merger between two of the UK’s biggest mobile networks could get the green light – if they stick to their commitments to invest in the country’s infrastructure, the competition watchdog has said.

The Competition and Markets Authority (CMA) said the merger of Vodafone and Three had “the potential to be pro-competitive for the UK mobile sector”.

Announced last year, the proposed £15bn merger would bring 27 million customers together under a single provider.

The watchdog previously warned that tens of millions of mobile phone users could end up paying more if the merger went ahead.

However, the two groups recently set out plans to protect consumer pricing and boost network investment.

The CMA has now laid out a list of “remedies” required for the deal to go-ahead.

They include the networks committing to freezing certain tariffs and data plans for at least three years to protect customers from short-term price rises in the early years of the network plan.

Stuart McIntosh, chair of the inquiry group leading the investigation, said on Tuesday: “We believe this deal has the potential to be pro-competitive for the UK mobile sector if our concerns are addressed.

“Our provisional view is that binding commitments combined with short-term protections for consumers and wholesale providers would address our concerns while preserving the benefits of this merger.

“A legally binding network commitment would boost competition in the longer term and the additional measures would protect consumers and wholesale customers while the network upgrades are being rolled out.”

Today’s announcement is provisional, with a final decision due before 7 December. The inquiry group is inviting feedback on today’s announcement by 5pm on 12 November.

The CMA also published a list of potential solutions – which it called remedies – to issues it identified with the merger.

If the networks want the merger to go ahead, the watchdog requires Vodafone and Three to:

• Deliver a joint network plan to set out network upgrades and improvements over eight years;

• Commit to keeping certain existing tariff costs and data plans for at least three years to protect customers from price hikes;

• Commit to pre-agreed prices and contract terms so Mobile Virtual Network Operators (MVNOs) – mobile providers that do not own the networks they operate on – can obtain competitive wholesale deals.

Vodafone and Three are two of the biggest mobile firms in the UK, and their networks support a number of MVNOs including Asda Mobile, Lebara, Voxi, and Smarty.

Responding to the watchdog’s announcement, a spokesperson for Vodafone on behalf of the merger said: “The merger will be a catalyst for positive change.

“It will bring significant benefits to businesses and consumers throughout the UK, and it will bring advanced 5G to every school and hospital across the country.

“The merger is also closely aligned with the government’s mission to drive growth and to encourage more private investment in the UK.”

Earlier this year, Three’s chief executive hit out at the UK’s “abysmal” 5G speeds and availability as he urged regulators to approve the company’s merger with Vodafone.

Robert Finnegan noted his firm’s “cash flows have been negative since 2020 and our costs have almost doubled in five years, meaning investment in [the] network is unsustainable”.

“UK mobile networks rank an abysmal 22nd out of 25 in Europe on 5G speeds and availability, with the dysfunctional structure of the market denying us the ability to invest sustainably to fix this situation,” he added.

Business

Bosses rail at business secretary over ‘avalanche of costs’

Published

22 hours ago

November 4, 2024

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Bosses rail at business secretary over 'avalanche of costs'

Business leaders expressed frustration with ministers on Monday amid a growing budget backlash that bosses said would trigger an “avalanche of costs” and leave them with no choice but to slash investment and increase prices.

Sky News has learnt that bosses of large retail and hospitality companies and trade associations told Jonathan Reynolds, the business secretary, that last week’s budget risked damaging consumer confidence and exacerbating challenges facing the UK economy.

Among the dozens of companies represented on the call are said to have been Burger King UK, Fuller Smith & Turner, Greene King, Kingfisher and the supermarket chain Morrisons.

Mr Reynolds is said to have acknowledged that Rachel Reeves‘s inaugural fiscal statement had “asked a lot” of British business, with James Murray, the financial secretary to the Treasury, understood to have described it as “a once-in-a-generation budget”, according to several people briefed on the call.

One insider said that Nick Mackenzie, the chief executive of Greene King, had highlighted that the increase in employers’ national insurance (NI) contributions would cause “a £20m shock” to the company, while Fullers is understood to have warned that it would be forced to halve annual investment from £60m to £30m as a result of increased cost pressures.

Rami Baitieh, the Morrisons chief executive, told Mr Reynolds that the budget had exacerbated “an avalanche of costs” for businesses next year, and asked what the government could do to mitigate them.

Sources added that the CBI, the employers’ group, said its impact would be “severe”, while the British Beer & Pub Association added that there was now a disincentive to invest and flagged “a tsunami” of higher costs.

The range of comments on the call with ministers underlines the scale of discontent in the private sector about Labour’s first budget for nearly 15 years.

Only a small number of interventions during the discussion are said to have been in support of measures announced last week, with the Federation of Small Businesses understood to have praised the doubling of the employment allowance, which would see many of the smallest employers having their NI bills cut by £2,000.

The Department for Business and Trade has been contacted for comment, while none of the companies contacted by Sky News would comment.

Business

Retail giants face food price hikes dilemma after budget

Published

1 day ago

November 4, 2024

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Retail giants face food price hikes dilemma after budget

Two of Britain’s biggest food retailers will this week face pressure to publicly disclose whether they expect a fresh spike in prices next year as the industry grapples with huge tax hikes imposed in last week’s budget.

Sky News understands that Marks & Spencer (M&S), which will unveil half-year earnings on Wednesday, and J Sainsbury, which reports interim results the following day, are collectively facing an additional bill of close to £200m as a result of changes to employers’ national insurance contributions (NICs) announced by Rachel Reeves, the chancellor.

Industry sources said the pressure on pricing would be “intense” given the thin margins on which the big supermarkets already operate.

“Food price increases from next April are inevitable,” said one.

The warning comes a day after Ms Reeves told Sky News that “businesses will now have to make a choice, whether they will absorb that through efficiency and productivity gains, whether it will be through lower profits or perhaps through lower wage growth”.

Pointedly, she did not highlight the prospect of higher prices at the tills, with some retailers now weighing whether to explicitly blame the government for impending price increases – a move which will trigger renewed inflation in the UK economy.

The grocery industry is expected to be among the hardest-hit by the changes to employer NICs, particularly after the chancellor slashed the threshold at which businesses become liable for it to just £5,000.

Tens of thousands of people employed part-time in the sector earn between that sum and the current threshold of £9,100.

The first major retailer to report financial results since the budget will be Primark’s parent, Associated British Foods (ABF), on Tuesday.

Insiders downplayed the risks of price hikes from Primark given its track record of absorbing inflationary pressures without passing them on to consumers.

ABF’s additional employer NICs bill is expected to be in the region of £25m, according to one analyst.

Overall, the retail sector could end up paying billions of pounds of additional tax given the scale of its workforce.

Ms Reeves has vowed to raise £25bn extra annually from the changes to employer NICs.

In addition to that, the rise in the national living wage will add a further burden to the financial pressures facing the retail industry.

Prior to the budget, Stuart Machin, the M&S chief executive, urged the chancellor not to increase taxes on it, calling them “a short-term, easy fix”.

“When I hear about plans to increase national insurance, a tax with no link to profit which hits bigger employers like us and our smaller suppliers, I’m concerned.

“The chancellor was right in the past to call national insurance a tax on workers.”

Jonathan Reynolds, the business secretary, will hold talks with British business leaders later on Monday about the impact of the budget.

A number of executives will be given the opportunity to ask questions on a call in which more than 100 companies are expected to be represented, although one boss who is critical of many of the budget measures said they were likely to be prevented from voicing their concerns publicly on the call.

ABF, M&S and Sainsbury’s all declined to comment.