How will the energy sector look in a post Brexit Britain?

The nation has voted and Great Britain will be exiting the EU. The day after the result the only certainty was uncertainty, the value of the pound plummeted and reached a 31-year low and the FTSE 100 lost ground rapidly. On both sides of the house, MPs have resigned their positions, and recriminations abound. The ‘in’ camp seem to be stunned into silence and the ‘out’ camp are redefining some of the promises they made during the campaign, Nigel Farage described the promise of £350 million for the NHS as ‘a mistake’.

The uncertainty has had a major impact on financial markets and consequently the price of Gas and Electricity. The day after the referendum many suppliers stopped forward pricing and although they are now offering prices, energy costs have increased and look certain to climb as long as the uncertainty lasts. This short term effect could continue to the autumn when we get a clearer idea on the delivery plan for BREXIT

In the longer term, we are relying on the development of another four or five interconnectors with mainland Europe and Ireland to secure our supply levels. Whilst these privately funded initiatives sit outside the direct control of the EU there is no getting away from the fact that our move away from, not towards, Energy Market harmonisation makes pricing of the use of the interconnectors difficult and may hinder the progress towards completion of these major engineering projects. This sounds a long way removed from business energy contracts but without the connectors we may struggle to meet the nation’s electricity requirements. The final output to shortage of supply is, of course, an increase in price.

Over the past few weeks many clients have been hesitant about signing contracts preferring to wait for the referendum result. This may have been in the clear expectation that we would remain in the EU. Unfortunately, the effect of the leave vote has been an increase in price.  Our current advice is to secure contracts sooner rather than later as prices look set to continue to rise in the uncertain months ahead.

At Power Direct we will assess each client’s requirement’s individually so if you’re unsure about your business energy strategy after the referendum, we can help.

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