As the UK steam rollers towards the Brexit deadline, ironically set for Halloween, the announcement that Boris Johnson intends to initiate the Prorogation of Parliament has had little effect on the volatility of the energy markets. This is mainly because the energy markets have been set for ‘no-deal’ for over a year – the money markets are rarely wrong it seems!
Many market analysts are still forecasting an increase similar to MP’s expenses claims of circa 20% during any Brexit transitional period, but we are still in a period of uncertainty and until a definitive decision is made, the markets will continue to be in this period of stasis.
It remains a keen time to look to renew gas as the UK system remains significantly oversupplied due to unusual seasonal temperatures and record numbers of LNG Tankers arriving into the UK over the past few months from Asian and European markets. The UK has now also become one of the top 10 importers of American LNG and with a ‘special trade deal’ on the cards between the UK and the USA this could help maintain the levels and prices of the current gas market. This has come despite Norway reducing its overall gas shipments by circa 16% via the Interconnector pipeline due to scheduled maintenance, but this maintenance also means the UK markets has no way of shipping gas back to the continent via this pipeline building stocks within the UK… for now!
The long-term electric market forecast is not as positive (no pun intended), with fears that the market price for electricity could climb because of a fall in the value of the pound against the Euro coupled with potential cost implications of severing ties with EU Energy markets. The UK imports just 7% of its total demand from Europe, but the UK is reliant on electricity imports and the latest Government figures show that the UK’s net electricity imports reached their highest level in the first quarter of this year. The Government hopes to increase imports to circa 20% by 2025, which can only lead to cost increases to businesses and a no-deal Brexit could also leave the UK facing third-party costs to use the power lines connecting the UK to European power markets. If these third-party costs are indeed introduced, even if your business is in a fully fixed energy contract, as these charges are classified as ‘newly introduced Government charges’, suppliers WILL be able to pass these additional costs onto your business regardless! The real increase will be seen by those businesses on a ‘pass through’, non-fixed energy contract who will potentially see costs increase overnight on the 1st November in the event of a no-deal Brexit!
For advice on how Brexit will affect your Business energy costs, get in touch with Fox Energy, the TSA’s Energy Alliance Partner on 0800 488 0915 or email [email protected]