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

Sir Jim Ratcliffe scolds Tories over handling of economy and immigration after Brexit

Published

45 mins ago

May 19, 2024

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Sir Jim Ratcliffe scolds Tories over handling of economy and immigration after Brexit

Billionaire Sir Jim Ratcliffe has told Sky News that Britain is ready for a change of government after scolding the Conservatives over their handling of the economy and immigration after Brexit.

While insisting his petrochemicals conglomerate INEOS is apolitical, Sir Jim backed Brexit and spent last weekend with Labour leader Sir Keir Starmer at Manchester United – the football club he now runs as minority owner.

“I’m sure Keir will do a very good job at running the country – I have no questions about that,” Sir Jim said in an exclusive interview.

“There’s no question that the Conservatives have had a good run,” he added. “I think most of the country probably feels it’s time for a change. And I sort of get that, really.”

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Sir Jim was a prominent backer of leaving the European Union in the 2016 referendum but now has issues with how Brexit was delivered by Tory prime ministers.

“Brexit sort of unfortunately didn’t turn out as people anticipated because… Brexit was largely about immigration,” Sir Jim said.

“That was the biggest component of that vote. People were getting fed up with the influx of the city of Southampton coming in every year. I think last year it was two times Southampton.

“I mean, no small island like the UK could cope with vast numbers of people coming into the UK.

“I mean, it just overburdens the National Health Service, the traffic service, the police, everybody.

“The country was designed for 55 or 60 million people and we’ve got 70 million people and all the services break down as a consequence.

“That’s what Brexit was all about and nobody’s implemented that. They just keep talking about it. But nothing’s been done, which is why I think we’ll finish up with the change of government.”

UK needs to get ‘sharper on the business front’

Prime Minister Rishi Sunak has indicated an election is due this year but Monaco-based Sir Jim is unimpressed by the Conservatives’ handling of the economy.

“The UK does need to get a bit sharper on the business front,” he said. “I think the biggest objective for the government is to create growth in the economy.

“There’s two parts of the economy, there’s the services side of the economy and there’s the manufacturing side. And the manufacturing, unfortunately, has been sliding away now for the last 25 years.

“We were very similar in scale to Germany probably 25 years ago.

“But today we’re just a fraction of where Germany is and I think that isn’t healthy for the British economy… particularly when you think the north of England is very manufacturing based, and that talks to things like energy competitiveness, it talks to things like, why do you put an immensely high tax on the North Sea?

“That just disincentivises people from finding hydrocarbons in the North Sea, in energy.

“And what we need is competitive energy. So I mean, in America, in the energy world, in the oil and gas world, they just apply a corporation tax to the oil and gas companies, which is about 30%. And in the UK we’ve got this tax of 75% because we want to kill off the oil and gas companies.

“But if we don’t have competitive energy, we’re not going to have a healthy manufacturing industry. And that just makes no sense to me at all. No.”

‘We’re apolitical’

Asked about INEOS donating to Labour, Sir Jim replied: “We’re apolitical, INEOS.

“We just want a successful manufacturing sector in the UK and we’ve talked to the government about that. It’s pretty clear about our views.”

Sir Jim was keener to talk about the economy and politics than his role at struggling Manchester United, which he bought a 27.7% stake in from the American Glazer family in February – giving him an even higher business profile.

Push for stadium of the North

He is continuing to push for public funds to regenerate Old Trafford and the surrounding areas despite no apparent political support being forthcoming. Sir Keir was hosted at the stadium for a Premier League match last weekend just as heavy rain exposed the fragility of the ageing venue.

“There’s a very good case, in my view, for having a stadium of the North, which would serve the northern part of the country in that arena of football,” Sir Jim said. “If you look at the number of Champions League the North West has won, it’s 10. London has won two.

“And yet everybody from the North has to get down to London to watch a big football match. And there should be one [a large stadium] in the North, in my view.

“But it’s also important for the southern side of Manchester, you know, to regenerate.

“It’s the sort of second capital of the country where the Industrial Revolution began.

“But if you have a regeneration project, you need a nucleus or a regeneration project and having that world-class stadium there, I think would provide the impetus to regenerate that region.”

Business

Marks & Spencer’s website and app go down

Published

18 hours ago

May 18, 2024

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Marks & Spencer's website and app go down

Marks & Spencer’s website and app has not been working for several hours, with a message telling shoppers “you can’t shop with us right now”.

“We’re working hard to be back online as soon as possible,” it adds.

All the menus and images have disappeared apart from one showing a model in a green jacket.

Customers trying to use the app got the message: “Sorry you can’t shop through the app right now. We’re busy making some planned changes, but will be back soon.”

The site is understood to have been down for several hours.

Replying to one customer on X, the retailer said: “We’re experiencing some technical issues but we are working on it.”

M&S is the latest high street name to have technical issues – last month some Sainsbury’s shoppers had problems with their online orders.

The outage comes a few days before M&S is expected to reveal a big jump in annual profits.

It’s been a successful year for the brand, with strong sales across the business following a turnaround plan that has included store closures and cost cutting.

Business

Employees at fintech giant Revolut to cash in with $500m share sale

Published

22 hours ago

May 18, 2024

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Employees at fintech giant Revolut to cash in with 0m share sale

Bosses at Revolut, Britain’s biggest fintech, are drawing up plans to allow employees to cash in with a sale of stock valued at hundreds of millions of pounds.

Sky News has learnt that the banking and payments services provider is lining up investment bankers to coordinate a secondary share sale worth in the region of $500m (£394m).

Morgan Stanley, the Wall Street bank, is expected to be engaged to work on the proposed stock offering, which will take place later this year.

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City sources said this weekend that Nik Storonsky, Revolut’s co-founder and chief executive, was determined to seek a valuation of at least the $33bn (£26bn) it secured in a primary funding round in 2021.

“This will not be a down-round,” said one person familiar with Revolut’s thinking.

Although the fintech, which has more than 40 million customers, is not planning to raise new capital as part of the transaction, any sizeable share sale will still be closely watched across the global fintech sector.

It is expected to be restricted to company employees.

Revolut ranks among the world’s largest financial technology businesses, with revenue virtually doubling last year to around £1.7bn, according to figures expected to be published in the coming months.

Founded in 2015, it has experienced a string of regulatory and compliance challenges, with reports last year highlighting its release of funds from accounts flagged by the National Crime Agency as suspicious.

The company’s growth has taken place at breakneck speed, with customer numbers soaring from 16.4m at the point of the Series E fundraising nearly three years ago.

Insiders argued that despite the protracted downturn in tech valuations over the last two years, Revolut’s relentless expansion would easily justify it maintaining its status as Britain’s most valuable fintech.

Monzo, the UK-based digital bank, recently confirmed a Sky News story that it had closed a funding round worth nearly £500m, including backing from an arm of Google’s owner, Alphabet, and a Singaporean sovereign wealth fund.

Elsewhere, however, the funding landscape has been bleaker, with a growing number of tech companies which had attracted unicorn valuations of more than $1bn now struggling to stay afloat.

Revolut has allotted stock options to many of its 10,000 employees as part of their compensation packages, although it was unclear how many would be eligible to dispose of equity in the transaction later this year.

A source close to the company said it had had numerous expressions of interest from prospective investors.

Revolut’s current shareholders include SoftBank’s Vision Fund and Tiger Global.

News of the proposed share sale comes as Revolut’s investors continue to await positive news about its application for a UK banking licence.

The company applied to regulators to become a bank in Britain more than three years ago, but has so far failed to secure approval.

Mr Storonsky has been publicly critical of the delay, and last year questioned the approach of British regulators and politicians, as he suggested that he would not contemplate a listing on the London Stock Exchange.

An initial public offering of Revolut appears to still be some way off, although it would not surprise investors or industry peers if it initiated a listing process in the next couple of years.

One person close to Revolut said board members were among those expected to participate in the secondary share sale, although further details were unclear this weekend.

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The company is chaired by Martin Gilbert, the City veteran who has faced governance and performance challenges at Assetco, the London-listed asset manager he runs.

Its other directors include Michael Sherwood, the former Goldman Sachs executive who was jointly responsible for its operations outside the US and who was regarded as one of the most skilled traders of his generation.

An external shareholder in the company said the exclusion of non-employees from the deal could draw criticism from some investors.

Revolut has conducted secondary share sales of this kind in the past, including after its 2021 Series E round.

This weekend, Revolut declined to comment.