It’s true to say the UK has become worse off. But some have felt the brunt more than others

Published

2 years ago

April 26, 2023

admin

When Huw Pill said, in a recent Columbia University podcast, that British people need “to accept that they’re worse off” the comments understandably hit a raw nerve.

With the country going through a once-in-a-generation cost of living crisis, it’s hardly palatable to be lectured by a very well-paid former Goldman Sachs banker that we all need to live a little less extravagantly.

But while Mr Pill’s comments were delivered with his foot firmly lodged in his mouth, there is an important truth lurking beneath them.

That truth is that the country as a whole is undoubtedly worse off as a result of the sharp increase in energy prices recently. Simply put, these days we import a lot of our energy, mostly in the form of natural gas.

And since those energy prices have risen so sharply, we are all having to pay more for our goods and services without earning more money in return. We – by which I mean the country as a whole – are all poorer.

You get a sense of this when you look at Britain’s national income – the amount of cash we’re generating here in the country – and subtract the amount of cash we consumers tend to spend each year.

The chart you end up with looks somewhat terrifying: a cliff-edge line of the likes we’ve never seen before. This is a pretty good illustration of how dramatically our collective net worth has fallen in the past year or so.

Yet saying the country as a whole is poorer is not the same as saying everyone is feeling the squeeze in quite the same way.

Indeed, look at the impact of this loss of collective worth and you see big differences. A few companies (and their employees and shareholders), notably energy producers, have done very well out of the price spike. Most have not.

In much the same way, the pain of higher prices is felt differently at different income levels. Inflation, remember, is the rate at which prices are going up each year.

But the extent to which different income groups have leeway, either through their earnings or their savings, to shoulder that increase, differs greatly.

Study after study has shown that lower income groups are feeling the impact of higher energy and food prices considerably more than higher income groups.

Broadly speaking, those in the upper end of the income distribution (which, for what it’s worth, includes pretty much all Bank of England economists) have seen significantly smaller falls in their spending potential than those at the lower end. The country has become worse off, but some have felt the brunt of it more than others.

These are what economists would tend to call “distributional” issues: how the benefits (or in this case pain) of an economic phenomenon are distributed out among the population.

Typically, the Bank of England tends to focus less on such issues than the big picture – that nationwide story about how we are, in aggregate, all worse off.

Not, it’s worth saying, because they’re heartless and don’t care, but because they view such challenges as something democratically elected politicians should be addressing rather than ivory tower academics in Threadneedle Street. Which is fair enough.

However, the cost of living crisis is two things at once: a big, macroeconomic phenomenon (the country has become poorer) and a distributional phenomenon (some people are feeling the pain more than others).

Mr Pill’s main mistake was not to be clearer that he was talking about the former issue, without being clearer that he wasn’t trying to pass judgement on the latter.

Still, it’s not the first time someone from the Bank of England has said something indelicate and insensitive at a time of nationwide economic insecurity – and it’s unlikely to be the last.

Business

Customers of five water firms are facing higher than expected hikes to bills

Published

12 hours ago

October 9, 2025

admin

Customers of five water firms are facing higher than expected hikes to bills

Customers of five water firms are facing higher than expected rises to their inflation-busting bills after the companies disputed limits imposed by the industry regulator.

The Competition and Markets Authority (CMA) was called in to review Ofwat’s determinations on what Anglian Water, Northumbrian Water, South East Water, Southern Water, and Wessex Water could charge customers from 2025-30.

The CMA’s panel said on Thursday: “The group has provisionally decided to allow 21% – an additional £556m in revenue – of the total £2.7bn the five firms requested.

“This extra funding is expected to result in an average increase of 3% in bills for customers of the disputing companies, which is in addition to the 24% increase for customers of these companies expected as part of Ofwat’s original determination.”

Money latest: The generation that hates their job the most

The decision showed that Wessex household and business customers faced the largest increase – on top of the rise agreed by Ofwat – of 5%, leaving their average annual bills at £622.

South East and Southern customers will see rises of 4% and 3% respectively while Anglian and Northumbrian’s are set to soak up the lowest percentage increase of just 1%.

South East had sought the biggest increase – 18% on top of the 18% hike it had been granted over the five-year period.

The companies exercised their right to an appeal after Ofwat released its final determinations on what they could charge at the end of last year.

They essentially argued that they could not meet their regulatory requirements under the controls amid a rush to bolster crucial infrastructure including storm drains, water pipelines and storage capacity.

Crisis-hit Thames Water was initially among them but it later withdrew its objection pending the outcome of ongoing efforts to secure its financial future through a change of ownership.

Chair of the CMA’s independent panel, Kirstin Baker, said: “We’ve found that water companies’ requests for significant bill increases, on top of those allowed by Ofwat, are largely unjustified.

“We understand the real pressure on household budgets and have worked to keep increases to a minimum, while still ensuring there is funding to deliver essential improvements at reasonable cost.”

Ofwat, which has faced industry criticism in the past for an emphasis on keeping bills low at the expense of investment, is set to be replaced by a new super regulator under plans confirmed in the summer.

It has faced outrage on many fronts, especially over sewage spills, and allowing rewards for failure.

Water Minister Emma Hardy said in response to the CMA’s decision: “I understand the public’s anger over bill rises – that’s why I expect every water company to offer proper support to anyone struggling to pay.

“We’ve made sure that investment cash goes into infrastructure upgrades, not bonuses, and we’re creating a tough new regulator to clean up our waterways and restore trust in the system.

“We are laser focused on helping ease the cost of living pressure on households: we’ve frozen fuel duty, raised the minimum wage and pensions and brought down mortgage rates – putting more money in people’s pockets.”

Business

Britain’s winter blackout risk the lowest in six years – but ‘tight’ days expected

Published

12 hours ago

October 9, 2025

admin

Britain's winter blackout risk the lowest in six years - but 'tight' days expected

Britain is at the lowest risk of a winter power blackout than at any point in the last six years, the national electricity grid operator has said.

Not since the pre-pandemic winter of 2019-2020 has the risk been so low, the National Energy System Operator (NESO) said.

It’s thanks to increased battery capacity to store and deploy excess power from windfarms, and a new subsea electricity cable to Ireland that came on stream in April.

The margins between expected demand and supply are now roughly three gas power stations greater than last year, the NESO said.

It also comes as Britain and the world reached new records for green power.

For the first time, renewable energy produced more of the world’s electricity than coal in the first half of 2025, while in Britain, a record 54.5% of power came from renewables like solar and wind energy in the three months to June.

More renewable power can mean lower bills, as there’s less reliance on volatile oil and gas markets, which have remained elevated after the invasion of Ukraine and the Western attempt to wean off Russian fossil fuels.

“Renewables are lowering wholesale electricity prices by up to a quarter”, said Jess Ralston, an energy analyst at the Energy and Climate Intelligence Unit (ECIU) thinktank.

In a recent winter, British coal plants were fired up to meet capacity constraints when cold weather increased demand, but still weather conditions meant lower supply, as the wind didn’t blow.

Those plants have since been decommissioned.

But it may not be all plain sailing…

There will, however, be some “tight” days, the NESO said.

On such occasions, the NESO will tell electricity suppliers to up their output.

The times Britain is most likely to experience supply constraints are in early December or mid-January, the grid operator said.

The NESO had been owned by National Grid, a public company listed on the New York Stock Exchange, but was acquired by the government for £630m in 2023.

Business

Man Utd and chemicals boss warns of ‘moment of reckoning’ for his industry

Published

12 hours ago

October 9, 2025

admin

Man Utd and chemicals boss warns of 'moment of reckoning' for his industry

Sir Jim Ratcliffe, the co-owner of Manchester United and head of Ineos, one of Europe’s largest chemical producers, has staged an “11th-hour intervention” in an effort to “save” the chemical industry.

Sir Jim has called on European legislators to reduce price pressures on chemical businesses, or there “won’t be a chemical industry left to save”.

“There’s, in my view, not a great deal of time left before we see a catastrophic decline in the chemical industry in Europe”, he said.

The “biggest problem” facing businesses is gas and electricity costs, with the EU needing to be “more reactive” on tariffs to protect competition, Sir Jim added.

Prices should be eased on chemical companies by reducing taxes, regulatory burdens, and bringing back free polluting permits, the Ineos chairman and chief executive said.

It comes as his company, Europe’s biggest producer of some chemicals and one of the world’s largest chemical firms, announced the loss of 60 jobs at its acetyls factory in Hull earlier this week.

Cheap imports from China were said to be behind the closure, as international competition facing lower costs has hit the sector.

What could happen?

Now is a “moment of reckoning” for Europe’s chemicals industry, which is “at a tipping point and can only be saved through urgent action”, Sir Jim said.

European chemical sector output declined significantly due to reduced price competitiveness from high energy and regulatory costs, according to research funded by Ineos and carried out by economic advisory firm Oxford Economics.

The report said the continent’s policymakers face a “critical” decision between acting now to safeguard “this vital strategic industry or risk its irreversible decline”.

As many as 1.2 million people are directly employed by chemical businesses, with millions more supported in the supply chain and through staff spending wages, the Oxford Economics report read.

Average investment by European chemical firms was half that of US counterparts (1.5%, compared to 3%), a trend which is projected to continue, the report added.