Home Business Insights & Advice How will Brexit affect business energy bills?

How will Brexit affect business energy bills?

by Sponsored Content
18th May 20 11:12 am

As of 31st January 2020, the UK has now left the European Union. Business owners and decision makers still have some lingering questions on what economic impact this significant change will have. There have been a number of predictions from analysts in all industries, some welcome the change, whilst others want a reversal. Without a doubt, there is a level of uncertainty in terms of the long-term effects. Will the UK prosper or will we regret these decisions.

New terms still have to be agreed but it will not come as a surprise that these negotiations aren’t the highest priority right now, as the coronavirus pandemic is still at large. Once the rate of new infections decreases significantly across the UK and mainland Europe, talks will presumably restart.

There will be financial implications in every sector, and change will occur from top to bottom. It’s only normal for many business owners and managers to be concerned and cautious. From trade agreements to regulations being revised, workforce and supply chains, and the inevitable increase in expenditure will all impact revenues and profits.

One area that looks to increase in cost is commercial energy bills. This is why it is now more important than ever to compare business energy suppliers through a comparison site such as Utility Saving Expert. The site allows you to filter the best deals and find the most competitive tariffs through a free no obligation quote. The process is relatively straightforward and can save a lot of time and hassle. Now why exactly is the cost of gas and electricity set to rise with Brexit? The road will be paved with numerous challenges, so having a good understanding on the subject will be useful.

Why will my business pay more for energy after Brexit?

According to the House of Lords committee, the UK may face energy shortages and increased costs after Brexit, although a negative impact is only likely to occur if the transition period hasn’t been managed effectively. One challenge that the UK will have to contend with is the fact that nearly half of the country’s gas supply is sourced from the continent.

Nearly 40% of UK gas comes directly from Norwegian and other European pipelines. Additionally, France, Ireland and Holland provide 6% of the country’s electricity. By leaving the EU single market without a suitable trade deal poses a risk to the UK and its partners. These changes could mean that consumers will see their bills increase when trading outside the EU’s internal energy market.

It’s important to note that the country will still be subject to the European Union’s internal energy market, but due to being in a weaker position by not being a member state, we will not be able to contribute in the decision-making process. This could mean that the cost of transporting energy may rise, resulting in higher prices for business and domestic users.

Currently, four subsea pipelines connect the UK to Europe. Furthermore, eleven are currently being planned and/or under construction. A minimum of eight pipelines are due to be completed by 2022 at the earliest. This will inevitably increase the country’s dependency on imported energy. Although it doesn’t necessarily mean it will be problematic if suitable agreements can be signed. However, the free flow of gas and electricity across these interconnected pipes is vital to maintaining a fair playing field in the energy market.

Another area of discussion is the impact all of the above will likely have on the environment. Without the right negotiated trade deal, energy providers could be at risk when experiencing adverse weather conditions. These subsea cables help balance energy supplies and guarantee supply when wind and solar power becomes unavailable.

One of the main potential disadvantages of this is a disruption in the supply leading to power outages, and the already mentioned increasing costs. Climate change activists will also be concerned about any changes made to tackling global warming and reducing overall carbon emissions.

Right now, the UK is part of the EU Emission Trading System (EU ETS), an EU-wide cap and trade system which puts a price on carbon through trading of emission permits. By exiting, clarity will need to be provided around what carbon pricing policy will replace it alongside any other adjusted terms.

Normally, energy suppliers will buy gas and electricity at wholesale prices years in advance, after calculating how much they will require. This is done to protect themselves against market volatility.

In conclusion, there is a cloud of uncertainty on what will and won’t happen in the energy industry. However, it’s worth remaining cautiously optimistic as there is still time to find and agree to a suitable trade deal that benefits all parties. One thing is certain though, businesses can take immediate steps to improve their energy efficiency and save money by switching to a cheaper commercial energy provider.

Leave a Comment


Sign up to our daily news alerts

[ms-form id=1]