UK businesses face gas bills up to 80% higher on Iran war
Electricity bills have jumped by an average of 10% to 30% since the end of February
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[LONDON] UK businesses face a sharp increase in energy costs as the Iran war drives up wholesale gas and power prices, threatening investments and curbing profits.
Electricity bills have jumped by an average of 10 to 30 per cent since the end of February, depending on the sector and size of company, according to energy consultant Cornwall Insight. Gas contracts have surged by 25 to 80 per cent, it added.
The conflict in Iran has effectively closed the critical Strait of Hormuz, choking off gas and oil flows from the Persian Gulf and reverberating across energy markets. Unlike British households, which are cushioned by a price cap, businesses that have not hedged or locked in long-term energy contracts could be hit by the soaring costs.
“There is no real safety net for businesses when the wholesale market spikes,” said Jacob Briggs, energy users lead at Cornwall Insight. “For some firms, this could mean the difference between investing in growth this year or shelving their plans entirely.”
The British Retail Consortium (BRC) warned of the pressure from rising energy bills on businesses with tight margins, that are already grappling with business rates and higher employment costs. The surge in prices linked to the war in the Middle East could increase transport as well as energy costs for businesses, said Harvir Dhillon, economist at the BRC.
Next month is a popular time of the year for businesses to renegotiate energy deals with suppliers, potentially sharpening the impact, according to Cornwall Insight.
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The government is under pressure to shield consumers and businesses from price spikes, with the conflict in the Middle East well into its fourth week.
Bank of England (BOE) rate-setter Megan Greene warned there will be lasting effects for UK inflation, even in a “best case” scenario where the conflict in the Middle East swiftly de-escalates. The BOE has signalled that it may need to raise interest rates to rein in a fresh inflation spike caused by disruption to energy supplies. BLOOMBERG
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