Brexit Impact on UK Business Energy Prices
At the moment, UK private individuals, consumers, and businesses alike are going through a period of stress and uncertainty. Why? Of course, it is because of Brexit and the changes that may come once it finally happens.
Moreover, as you may know, one of the biggest issues that Brexit could bring with it is the possibility that utility and energy costs will increase dramatically after the UK leaves the EU.
If you were to compare business electricity prices with the ones of individuals/ consumers, it would be clear why businesses really have to worry about this potential increase in price. It goes without saying that they spend a lot of energy and that they could be spending even more!
Higher Energy Prices
We mentioned above that people are, at the moment, feeling uncertain as to how Brexit will affect their lives, mainly the energy prices. Even though Brexit is characterised by uncertainty, the reasons why energy prices could increase after it happens are as clear as daylight.
Therefore, let’s see why we could see Brexit impact UK business energy prices.
EU Investment Cut
As you may know, the UK imports roughly 5% of its electricity and 12% of its gas from the European Union, via four interconnectors. The latter are the cables that connect the UK to Europe. However, these interconnectors work because the states that are a member of the EU enjoy completely frictionless trade – naturally, the UK will not enjoy this anymore if it leaves Brexit.
When Brexit happens, the UK will have to endure tariffs – according to some sources, Britain may end up having to import a minimum of 20% of electricity, at increased rates.
If there’s no principle of frictionless trade, the EU may choose to impose tariffs related to the use of interconnectors. As mentioned above, not only the price of electricity may increase, as Britain will have to import more, but its transportation costs as well.
In short, we may see an increase that will affect businesses and consumers alike significantly.
The EU ETS
The European Emission Trading System is a trading scheme based on greenhouse gas emissions. Every single year, this commission sets a limit for the carbon emissions of industrial plants and power stations. The biggest polluters are then sent carbon permits.
If the UK leaves the EU, then the ETS won’t know exactly how to price the power that the UK is generating. This also implies difficulties for the country’s energy suppliers, as they must allow commodities traders to sell and buy energy for years in advance.
This uncertainty in carbon pricing may end up increasing the prices practised by energy suppliers and power generators.
The Bottom Line
In short, it is uncertainty that costs the UK the most money. Given the many difficulties that the power sector will have to face once Brexit happens, it goes without saying that they’ll take some measures and may prematurely increase the energy prices, in order to avoid taking a hit.
However, once again, almost everything is uncertain – unlike the increase in energy prices, a fact that is almost certain!