Gas prices hit record high as industry calls for emergency help

Published

3 years ago

October 5, 2021

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Wholesale gas prices have hit record highs and oil has reached a new three-year peak – further fuelling worries about higher prices for consumers and businesses ahead.

The British day-ahead contract for natural gas hit 277p per therm, 32% higher than Monday and surpassing the 275p per therm level seen during the “Beast from the East” weather system in 2018.

Meanwhile Brent crude climbed above $83 a barrel – threatening to further add to headaches for UK motorists who have just seen petrol prices climb to more than 136p a litre, a new eight-year high.

One economist predicted that the surge in wholesale gas and electricity prices were likely to mean still higher household bills when the Ofgem price cap is reviewed early next year.

Meanwhile, key energy intensive industries have asked for emergency measures to ensure they can keep operating through the winter, faced with the higher costs.

Surging gas prices have already taken their toll on the UK’s energy market, with nine smaller suppliers going bust in September alone.

They add to UK inflation pressures already being caused by supply chain strains, including a shortage of HGV drivers.

A series of factors are blamed for the increase in gas and electricity prices – which is a Europe-wide phenomenon – including lower production levels, higher demand for liquefied natural gas (LNG) in Asia, and a lack of wind to power the turbines upon which the grid increasingly lies.

The latest upturn was attributed to colder weather forecasts as well as a cut in French nuclear power generation due to a strike.

It is affecting contracts to buy gas a day in advance as well as agreements to supply energy over coming months.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said electricity and gas futures prices now pointed to Ofgem having to increase its default energy price tariff by 33% in April.

The cap, which affects around 15 million families on standard variable deals with their suppliers, has already just gone up by 12% adding a typical £139 to dual fuel bills.

It is designed to ensure consumers are not ripped off while at the same time being fair to suppliers who need to buy energy on wholesale markets.

But it was set at its latest level back in August and the surge in wholesale prices since then looks certain to mean it will go up again when it is next reviewed in February.

“That’s a lot of pain for low-income households coming down the tracks,” Mr Tombs tweeted.

“Will it be tenable for the government simply to do nothing?”

An industry body representing energy intensive sectors including steel, chemicals and fertilisers called for more help from the government to ensure they could continue to operate this winter.

Surging costs have already resulted in steel production stoppages at times of peak demand as well as the shutdown of two big fertiliser factories.

The government was forced to intervene as the shutdowns threatened to provoke a food supply crisis – because the carbon dioxide which is a by-product of fertiliser making is used to stun animals for slaughter and vacuum pack foods.

Richard Leese, chairman of the Energy Intensive Users Group, said: “We have already seen the impact of the truly astronomical increases in energy costs on production in the fertiliser and steel sectors.

“Nobody wants to see a repeat in other industries this winter given that UK EIIs [energy intensive industries] produce so many essential domestic and industrial products and are intrinsically linked with many supply chains.

“Now is the moment for government and Ofgem to take preventative action.”

Business

Post Office campaigner Sir Alan Bates says he is yet to receive reply to letter to PM

Published

7 hours ago

November 5, 2024

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Post Office campaigner Sir Alan Bates says he is yet to receive reply to letter to PM

Post Office campaigner Sir Alan Bates is yet to receive a reply from Sir Keir Starmer, despite writing to him over a month ago.

Sir Alan said he had written to the prime minister to remind him the “clock is still ticking” on a financial redress deadline for victims.

In his letter, he demanded a March 2025 deadline for compensation for sub-postmaster victims of the Horizon scandal.

Sir Alan confirmed to Sky News he was yet to hear back from the prime minister.

“It was over a month ago,” he said.

“I sent him a reminder yesterday. I told him the clock is still ticking and it’s now five months from the March deadline, which I’m told is still achievable by other professionals.

“So let’s get on with it, that’s all we want. Get on with it.”

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Business

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

Published

14 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

1 day 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.