{"id":1939,"date":"2022-08-31T10:35:39","date_gmt":"2022-08-31T09:35:39","guid":{"rendered":"https:\/\/blogs.bath.ac.uk\/iprblog\/?p=1939"},"modified":"2022-08-31T10:35:39","modified_gmt":"2022-08-31T09:35:39","slug":"energy-price-freezes-and-business-support-are-sticking-plasters-heres-how-to-protect-uk-families-and-companies-from-future-crises","status":"publish","type":"post","link":"https:\/\/blogs.bath.ac.uk\/iprblog\/2022\/08\/31\/energy-price-freezes-and-business-support-are-sticking-plasters-heres-how-to-protect-uk-families-and-companies-from-future-crises\/","title":{"rendered":"Energy price freezes and business support are sticking plasters \u2013 here\u2019s how to protect UK families and companies from future crises"},"content":{"rendered":"

David Bailey<\/a>\u00a0is Professor of Business Economics in the\u00a0Department of Management<\/a>\u00a0at the University of Birmingham.\u00a0Phil Tomlinson<\/a>\u00a0is Professor of Industrial Strategy and Deputy Director of the\u00a0Centre for Governance, Regulation and Industrial Strategy (CGR&IS)<\/a>\u00a0in the\u00a0School of Management<\/a>\u00a0at the University of Bath.<\/em><\/p>\n

The UK is bracing itself for a dark winter following the recent announcement of an\u00a080% increase<\/a>\u00a0in the government\u2019s energy price cap from October 1 2022. This will raise the annual bill for an average UK household to \u00a33,549. The cap is expected to go up again by up to 50% in January 2023, and some forecasters even fear bills could almost top\u00a0\u00a38,000 by the end of that year<\/a>.<\/p>\n

The energy price cap does not apply to businesses or public sector organisations such as schools and the NHS, however. There is no limit to what these organisations can be charged for their energy use. As heavy users of energy, exorbitant energy costs threaten their\u00a0daily operations<\/a>.<\/p>\n

Concerns over energy supply have also raised the very real prospect of\u00a0power cuts and blackouts<\/a>\u00a0this winter. Manufacturers and small businesses (who\u00a0employ around three-fifths<\/a>\u00a0of the UK workforce) are especially vulnerable and thousands are already reported to have\u00a0closed down<\/a>.<\/p>\n

What\u2019s more, some energy companies are now\u00a0refusing to supply<\/a>\u00a0small businesses or asking for large upfront payments, out of fear these companies will be unable to pay their energy bills. If these refusals start to occur on a wider scale, we should expect some supply chain disruption as companies literally struggle to keep the lights on.<\/p>\n

The crisis is also acute in the hospitality sector, which is already finding it difficult to\u00a0hire workers<\/a>\u00a0due to post-Brexit immigration rules. Pub owners have\u00a0issued warnings<\/a>\u00a0about potential closures across the sector. Even the traditional British chip shop is\u00a0under threat<\/a>\u00a0\u2013 several have already closed in recent months due to the high costs of cooking oils and energy.<\/p>\n

The prospect of business closures and shutdowns threatens to raise unemployment and exacerbate the\u00a0expected recession<\/a>. But the government has arguably failed to offer any\u00a0adequate solutions<\/a>.<\/p>\n

The\u00a0British Chambers of Commerce<\/a>\u00a0has written to government leaders with a five-point action plan to help business through the crisis. This includes calls for a COVID-style emergency energy grant for small- and medium-sized enterprises (SMEs), as well as stronger regulation of the energy market.<\/p>\n

Opposition parties have also put forward proposals to tackle the crisis. Both\u00a0Labour<\/a>\u00a0and the\u00a0Liberal Democrats<\/a>\u00a0have called for a six-month price freeze on bills.<\/p>\n

Labour have also suggested a \u00a31 billion contingency fund to support energy intensive industries like steel, chemicals and ceramics, as well as business rate cuts for SMEs. Alongside a price freeze, the Green Party have called for\u00a0renationalisation<\/a>\u00a0of the big five energy firms at a cost of around \u00a32.5 billion.<\/p>\n

There is some merit in these proposals although, in truth, they are largely sticking plasters. The UK\u00a0imports around 60% of gas<\/a>\u00a0for household and business energy use and so prices are determined on global wholesale markets.<\/p>\n

What\u2019s gone wrong?<\/strong><\/p>\n

\"\"<\/p>\n

This energy crisis sheds light on the UK\u2019s vulnerability and lack of energy security. Privatisation in the 1980s and 1990s led to a highly fragmented energy market and an over-reliance on short-term markets and imported oil and gas. Poor\u00a0policy choices<\/a>\u00a0over the last decade have left the UK with some of the\u00a0lowest energy storage capacity<\/a>\u00a0in Europe.<\/p>\n

Scrapping the\u00a0zero-carbon homes plan<\/a>, reducing\u00a0incentives and subsidies<\/a>\u00a0for solar power and onshore wind, and more than a\u00a0decade of inaction<\/a>\u00a0on home insulation now means the\u00a0UK wastes more household energy<\/a>\u00a0than any other country in western Europe. Lower energy efficiency puts greater pressure on the National Grid and raises energy costs for both business and households.<\/p>\n

Long-term solutions<\/strong><\/p>\n

There are no easy or quick solutions to this energy crisis. External energy shocks mean that countries become poorer and governments must decide how to best to distribute the pain among different groups.<\/p>\n

A co-ordinated and strategic package of policy support is now required. In the short term, most economists would agree that it makes sense to target financial support on\u00a0poorer households<\/a>, while also providing some assistance to businesses to safeguard the economy.<\/p>\n

But this crisis is also an opportunity to rethink the UK\u2019s long-term energy needs and to build resilience. In particular, the UK needs to get serious about a \u201cGreen New Deal<\/a>\u201d that weans both consumers and businesses off (imported) fossil fuels, and instead focuses on developing more renewable energy sources and reducing energy waste.<\/p>\n

For households, this means more subsidies for better home insulation. This is something\u00a0Italy has done <\/a>. It would cut\u00a0carbon emissions<\/a>\u00a0and deliver long-term savings.<\/p>\n

For business,\u00a0industrial policy<\/a>\u00a0can also play a critical role, providing funding for research into new industrial processes that reduce waste and improve energy efficiency. Some\u00a0industries<\/a>\u00a0are already taking this step by experimenting with new digital technologies such as\u00a0\u201cdigital twins\u201d<\/a>\u2013 simulations to help companies to better anticipate and optimise their energy use.<\/p>\n

If successful, such energy efficiencies could be applied across a range of sectors, including aerospace, automotive and medical technologies. This is a welcome first step in terms of rethinking our long-term energy needs to ensure UK businesses and consumers avoid future energy crises.<\/p>\n

This blog was\u00a0originally posted<\/a> on The Conversation on 30 August 2022. All articles posted on this blog give the views of the author(s), and not the position of the IPR, nor of the University of Bath.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

David Bailey\u00a0is Professor of Business Economics in the\u00a0Department of Management\u00a0at the University of Birmingham.\u00a0Phil Tomlinson\u00a0is Professor of Industrial Strategy and Deputy Director of the\u00a0Centre for Governance, Regulation and Industrial Strategy (CGR&IS)\u00a0in the\u00a0School of Management\u00a0at the University of Bath. The UK...<\/p>\n","protected":false},"author":1186,"featured_media":1942,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_post_was_ever_published":false},"categories":[128,112,114,129],"tags":[],"class_list":["post-1939","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-the-labour-market","category-economics","category-energy-and-environmental-policy","category-uk-politics"],"acf":[],"jetpack_featured_media_url":"https:\/\/blogs.bath.ac.uk\/iprblog\/wp-content\/uploads\/sites\/115\/2022\/08\/Energy-bills.png","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/blogs.bath.ac.uk\/iprblog\/wp-json\/wp\/v2\/posts\/1939","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.bath.ac.uk\/iprblog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.bath.ac.uk\/iprblog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.bath.ac.uk\/iprblog\/wp-json\/wp\/v2\/users\/1186"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.bath.ac.uk\/iprblog\/wp-json\/wp\/v2\/comments?post=1939"}],"version-history":[{"count":0,"href":"https:\/\/blogs.bath.ac.uk\/iprblog\/wp-json\/wp\/v2\/posts\/1939\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/blogs.bath.ac.uk\/iprblog\/wp-json\/wp\/v2\/media\/1942"}],"wp:attachment":[{"href":"https:\/\/blogs.bath.ac.uk\/iprblog\/wp-json\/wp\/v2\/media?parent=1939"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.bath.ac.uk\/iprblog\/wp-json\/wp\/v2\/categories?post=1939"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.bath.ac.uk\/iprblog\/wp-json\/wp\/v2\/tags?post=1939"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}