Cut electricity for four days in January, in industry and homes: the idea, as radical as it is, is now being considered by the United Kingdom to face winter and the potential shortage of gas. According to Bloomberg, the proposal is part of the “worst-case scenario” anticipated by the British government. For good reason, the country and its inhabitants are hit hard by the energy crisis, aggravated by the war in Ukraine. The situation is not about to get better: the energy price regulator Ogfem is due to announce on August 26 an increase in the energy price ceiling. It should go from 1971 pounds per year (2335 euros) to 3358 pounds (3978 euros) for an average household in Great Britain, provides the comparison site Uswitch.
In October 2021, this same ceiling was set at 1,277 pounds, or 1,512 euros. As a result, the number of unpaid invoices tripled, standing at 1.3 billion pounds. Analysts from the specialist firm Cornwall Insight even expect further increases in this ceiling in October, January and April, pushing it up to 4,427 pounds (5,243 euros). Eventually and without government intervention, the British bill could increase by 80%, according to the cabinet’s calculations…
Political blockage
In the United Kingdom, inflation could exceed 13% in October, according to the Bank of England (BoE), not seen since 1980. The rise in prices is largely fueled by soaring energy prices . The crisis is global: in June, inflation in the United States was 9.1%, a record for 41 years. In the euro zone, prices jumped 8.6%. If the BoE warned last week that the country is currently plunging into a long recession, it is the same across the Atlantic or on the Old Continent, according to many economists.
The United Kingdom nevertheless has a particularity: the most precarious households are particularly exposed to variations in energy costs. The International Monetary Fund, in a report published in early August, compared this additional burden for the richest 20% of households and the poorest 20%. As a result, energy inflation represents about 7% of the expenses of the wealthiest households, but more than 15% for the most modest [NDLR : en France, en Finlande ou en Suède, la hausse du coût de la vie est similaire pour les deux groupes, autour de 4%]. The situation of households is very dependent on government decisions and the British, for lack of a tariff shield such as can be found in France, are suffering badly.
Political deadlock does not help. A few weeks before the election of the new Prime Minister (September 5), who will replace Boris Johnson in Downing Street, no concrete decision has yet been taken by the Conservative government. Liz Truss and Rishi Sunak, the two contenders for the post, disagree on how to react to this crisis. The first, current Secretary of State for Foreign Affairs, is leaning towards a tax reduction plan to help households, while the 37 billion pounds (43.8 billion euros) of cumulative emergency plans deployed by his adversary when he was Minister of Finance, essentially served to compensate for the loss of purchasing power of the British, without tackling energy prices. For the time being, the government, still led by Boris Johnson, has contented itself with announcing new measures to come to support British households. The leader of the Conservative Party said his successor would come to their aid in the fall, without further details.
Nationalize companies in the energy sector?
“Only the government can intervene to avoid a disaster this winter,” pleaded Carla Denyer, co-leader of the Greens party with the Guardian, August 17. In order to counter the exorbitant rise in prices, the environmentalist party has proposed to nationalize the five main companies in the energy sector, including EDF Energy. “Other parties have proposed keeping energy prices at current levels, but we know they are already unaffordable, the policy continues. We would bring energy prices down to an affordable level.” This operation would cost the British government the modest sum of 2.85 billion pounds (3.37 billion euros), according to Trades Union Congress calculations, the umbrella organization of British trade unions. A good deal, in comparison with the takeover of Bulb, the sixth supplier of gas and electricity in the country, for a total of 2.2 billion pounds. For the moment, neither the Conservatives nor Labor have taken up this idea on their own, Labor proposing instead to freeze energy prices.
Regardless of the strategy chosen, the task will not be easy. The United Kingdom remains more sensitive than its European neighbors to the increase in gas and electricity prices, which account for a large part of its energy mix. In this sense, last April, the British government unveiled a new energy strategy with a strengthening of wind, solar, fossil fuels in the North Sea but also nuclear. According to Energy Minister Kwasi Kwarteng, the UK could build up to seven nuclear power stations by 2050.