Introduction: Energy firms expect bill help to continue in April
Good morning, and welcome to our rolling coverage of business, the world economy and the financial markets.
Hopes are growing that the UK government may reverse plans to lift the cost of energy for households in April.
The BBC reports this morning that some energy firms are preparing to amend bills in expectation that the government will keep support at or near current levels.
Currently, the Energy Price Guarantee limits the cost of gas and electricity to levels where a typical household bill is £2,500 per year. That limit is set to rise to £3,000 in April, and there have been many calls for ministers to change course and maintain current subsidies.
According to the BBC’s SimonJack, those calls may be heeded. He writes:
At the moment, the government is limiting the typical household bill to £2,500 a year, plus a £400 winter discount, which will also end from April.
From 1 April the help is scheduled to be scaled back, which will push bills up.
Fuel poverty campaigners have said the number of households struggling to afford bills could rise from 6.7 million to 8.4 million as a result of the April rise.
However, industry sources told the BBC that some energy companies have already started amending future bills to reflect that energy help will continue at or very near to current levels beyond 1 April.
Earlier this week, a Downing Street spokesperson indicated the plan to raise EPG to £3,000 per year was being re-examined, saying: “All I would say on this is it’s something we are just keeping under review.”
Ofgem, the energy regulator, cut its energy price cap to £3,280, reducing the maximum that a supplier can charge by almost £1,000 per year.
That means that the cost to the government of freezing bills is much lower than over the winter, as wholesale energy costs have dropped sharply since their peaks last year.
🚨The latest @ofgem price cap of £3,280 confirms that the cost of universal energy support – delivered through the Energy Price Guarantee (EPG) – is likely to fall by 89% next year to £1.4 billion.
If Hunt doesn’t u-turn, and freeze the EPG at its current level, the cost of living crisis will intensify for millions of households.
Citizens Advice predicted this week that unless the government changes course on planned reductions to the level of support for households under the Energy Price Guarantee, the number of people unable to afford their bills will double, from one in 10 to one in five.
The agenda
7am GMT: German trade balance for January
9am GMT: Eurozone service sector PMI report for February
9.30am GMT: UK service sector PMI report for February
10am GMT: Eurozone purchasing prices index (PPI) for January
3pm GMT: US service sector PMI report for February
4pm GMT: Andrew Hauser, Bank of England executive director for markets, gives speech on the LDI pension scheme crisis (text released at 11am)
Key events
‘Kick in the teeth’ for London, as ARM plans US-only listing
In the City, hopes that British chip technology firm Arm Ltd could list on the London stock market in 2023 have been dashed.
Arm’s owners, Japanese conglomerate SoftBank Group, have said they will pursue a US-only listing this year, ending speculation about a primary or a secondary listing in the UK.
Arm isn’t completely ruling out an eventual London listing, saying it intended to consider a subsequent IPO there in due course.
But, Arm Chief Executive Officer Rene Haas said in a statement that:
“After engagement with the British Government and the Financial Conduct Authority over several months, SoftBank and Arm have determined that pursuing a U.S.-only listing of Arm in 2023 is the best path forward for the company and its stakeholders,”
Arm used to be listed in London, before accepting a £24.3bn offer from Softbank in July 2016 (when the slump in the pound after the Brexit vote made it cheaper to buy a UK company).
The decision to float in New York is a blow to the UK government’s efforts to boost the City of London, and to attract more high-tech firms to list here.
“Softbank-owned Arm said it is aiming for a US IPO this year, as expectations fade that the British chipmaker could be heading for a London-listing. This is a blow to the UK government and the City of London post Brexit as Arm pins its hopes on New York, where some of the world’s biggest tech companies have floated including Apple and Tesla.
While the FTSE 100 enjoyed relative resilience last year partly because of its lack of technology giants, allowing it to avoid the ‘tech-wreck’, this has also long been a criticism of the UK blue chip index which has struggled to attract key behemoths in the sector. There have also been some high profile disasters in UK tech with Deliveroo’s IPO flop and THG’s share price slide.
Arm’s abandonment of London is another kick in the teeth for the Square Mile’s attractiveness among international investors as a go-to destination for technology giants.”
Jeremy Hunt can afford to extend the current energy bill support beyond April, according to Simon French, chief economist at UK investment bank Panmure Gordon.
French points out that last September, when the energy price guarantee was announced, the wholesale gas price was about three times the level it is today.
UK wholesale gas is trading around 120p per therm today, and was 360p/therm in early September.
That means that the amount the Treasury will give to energy companies to cap prices for households and businesses is ‘considerably lower’ than expected in this financial year, and into the next financial year (from April), French told the TodayProgramme, adding:
Do I expect them to reallocate some of that money to keep the energy price guarantee at its current £2500 level for households? Yes I do.
It’s clear the energy industry expects government support to continue beyond April, says the BBC’s SimonJack.
He cautions, though, that it isn’t a 100% done deal.
But with one company preparing their bills on the expectation that support will be maintained, and others waiting for a decision to be announced, it appears that the pressure from campaigners such as Martin Lewis has had an effect.
Jack tells the Today programme:
If companies are getting hints that this is going to happen, to the extent they are actually changing their processes and updating their bills in a different way, it’s a pretty clear indication that the intense pressure has actually had an effect and the government is preparing to bow to that pressure.
Introduction: Energy firms expect bill help to continue in April
Good morning, and welcome to our rolling coverage of business, the world economy and the financial markets.
Hopes are growing that the UK government may reverse plans to lift the cost of energy for households in April.
The BBC reports this morning that some energy firms are preparing to amend bills in expectation that the government will keep support at or near current levels.
Currently, the Energy Price Guarantee limits the cost of gas and electricity to levels where a typical household bill is £2,500 per year. That limit is set to rise to £3,000 in April, and there have been many calls for ministers to change course and maintain current subsidies.
According to the BBC’s SimonJack, those calls may be heeded. He writes:
At the moment, the government is limiting the typical household bill to £2,500 a year, plus a £400 winter discount, which will also end from April.
From 1 April the help is scheduled to be scaled back, which will push bills up.
Fuel poverty campaigners have said the number of households struggling to afford bills could rise from 6.7 million to 8.4 million as a result of the April rise.
However, industry sources told the BBC that some energy companies have already started amending future bills to reflect that energy help will continue at or very near to current levels beyond 1 April.
Earlier this week, a Downing Street spokesperson indicated the plan to raise EPG to £3,000 per year was being re-examined, saying: “All I would say on this is it’s something we are just keeping under review.”
Ofgem, the energy regulator, cut its energy price cap to £3,280, reducing the maximum that a supplier can charge by almost £1,000 per year.
That means that the cost to the government of freezing bills is much lower than over the winter, as wholesale energy costs have dropped sharply since their peaks last year.
🚨The latest @ofgem price cap of £3,280 confirms that the cost of universal energy support – delivered through the Energy Price Guarantee (EPG) – is likely to fall by 89% next year to £1.4 billion.
If Hunt doesn’t u-turn, and freeze the EPG at its current level, the cost of living crisis will intensify for millions of households.
Citizens Advice predicted this week that unless the government changes course on planned reductions to the level of support for households under the Energy Price Guarantee, the number of people unable to afford their bills will double, from one in 10 to one in five.
The agenda
7am GMT: German trade balance for January
9am GMT: Eurozone service sector PMI report for February
9.30am GMT: UK service sector PMI report for February
10am GMT: Eurozone purchasing prices index (PPI) for January
3pm GMT: US service sector PMI report for February
4pm GMT: Andrew Hauser, Bank of England executive director for markets, gives speech on the LDI pension scheme crisis (text released at 11am)
