Energy prices in UK, the bankruptcy of British industries, closure of British companies, new oil and gas fields in the UK, British steel mills, Governor of the Bank of England
How has the rise in energy prices in the UK affected the country’s industries?
What is the reason for the closure and downsizing of some British factories in recent months?
Rising energy prices in the UK have led to the closure of how many British energy-dependent companies?
What effect has the Ukraine war had on rising energy prices in Europe?
According to the Office for National Statistics (ONS), rising energy prices have affected 60% of the food and beverage industry in the country.
Damage to the British food industry from rising energy prices
THE ONS SAID THAT the UK Food and Beverage Industry has suffered more than any other business group from rising energy and raw material prices. More than two-thirds of UK food and beverage companies said prices for raw materials, goods or related services rose in March compared to half of other businesses in other sectors. According to the ONS, the rise in energy prices has affected 60% of the food and beverage industry. This figure is equal to 38% in other sectors.
UK on the brink of recession and inflation
The report highlights the challenge facing policymakers on the eve of a period of recession with high inflation. Prices are rising rapidly and economic growth has slowed. Rising food and energy prices have increased the risk of double-digit inflation in the UK this year and put pressure on Rishi Sunak, the UK’s Chancellor of the Exchequer and central bank.
The impact of the Ukraine war on rising prices
This information was published when food prices around the world rose due to the war in Ukraine. This war has disrupted the production and export of one of the largest suppliers of wheat, corn and vegetable oils. The price of natural gas and electricity has also risen sharply due to Europe’s dependence on imports from Russia. Only 3% of food and beverage companies in the UK say price increases have not affected them. This figure is equal to 20% for other businesses.
Closure of British energy companies
17% of British energy companies have been shut down since the beginning of this year due to rising gas and electricity prices, and the crisis in Ukraine will make the situation worse. High energy prices have forced some British manufacturers to stop production. The shutdowns are expected to widen in the event of a severe shortage of natural gas due to the Ukraine crisis. 17% of British companies in high energy demand have temporarily stopped production this year. Gas prices have increased 59-fold since May 2020, and oil prices have reached their highest level in seven years. Therefore, continued production is costly for factories. Russia’s invasion of Ukraine has exacerbated the situation, pushed up energy prices and left parts shortages. European automakers have closed their factories in recent days due to a shortage of parts.
Factory closures due to high energy prices
British steel plants have been temporarily shut down to deal with high prices and volatile energy. Factories that use electric ovens must decide whether to continue production. Energy prices are currently 300 pounds ($396) a megawatt-hour above pre-energy crisis levels. So the cost of producing one ton of steel in an electric furnace has increased by 150 pounds. Producers have raised prices and their profitability has been hurt. A survey of 132 manufacturing companies in the UK shows that 46% of them are setting up their business to reduce energy consumption, 39% have transferred high costs to customers and 11% are receiving additional funding to cover high energy costs.
UK’s vulnerability to geopolitical crises
The representative of the British offshore oil and gas operators said that the lack of investment to build new gas fields in the North Sea would increase the country’s vulnerability to geopolitical crises such as the recent tensions between Russia and Ukraine and rising energy prices. If new British oil and gas fields are not developed, the country will become increasingly vulnerable to price shocks and geopolitical events, and its gas production will be reduced by 75% by 2030. The OGUK Energy Policy Manager Will Webster said that without new investments in the construction of new gas fields in the North Sea, the country will be more vulnerable to crises such as the recent tensions between Russia and Ukraine.
The need to develop new oil and gas fields in UK
Millions of British families are living in energy poverty, and many have to choose between the cost of food and heating. 47% of British gas needs are currently met by domestic production. 31% is supplied through pipelines imported from Europe and more from Norway and 21% through liquefied natural gas imports. Russia would supply about 3.4 percent of British gas in 2020. According to the OGUK, new oil and gas fields need to be developed in the North Sea to prevent a 75% drop in domestic gas supply.
Energy price shock warning
The Bank of England warns of a “shock” in energy prices. According to the governor of the BoE, the sudden rise in energy prices has caused an economic shock in the country. According to the ONS, 51% of Britons spend less on non-essential items, 34% on electricity and gas, and 31% less on food and other necessities. “This really is a historical shock to real incomes,” Andrew Bailey, the governor of the Bank of England, said at an event held by the Bruegel think tank in Brussels. “The shock from energy prices this year will be larger than every single year in the 1970s.”
The rising cost of living in the UK
Oil and gas prices have risen since Russia launched a military strike on Ukraine and imposed sanctions on the country. At some point in March, crude oil rose to $120 a barrel, and natural gas in Europe peaked at nearly $4,000 per 1,000 cubic meters. The EU and UK have pledged to suspend energy purchases from Russia to reduce Moscow’s access to cash. London has pledged to suspend Russian oil imports later this year. Rising energy prices have pushed up the cost of living in the UK, and official figures show that prices rose 6.2% in the 12 months to February, the fastest rate in 30 years. British consumers and businesses are expected to face declining economic growth under strong pressure from rising living costs.
The 1970s are known in UK as the “Winter of Discontent” that took place between 1978 and 1979. During these years, when large-scale strikes by private and later state-owned unions were the hallmarks, people demanded higher wages. A further increase in gas prices will exacerbate the current energy crisis in UK. Gas and electricity suppliers in the UK will go bankrupt and consumers will face rising living costs due to rising energy bills from the beginning of this month. Conditions will be even worse for consumers this month.
