The UK energy crisis
This widespread, historically high level of inflation and unaffordable energy has stifled the growth of almost all sectors in the UK economy, eroding the UK’s post -covid recovery. For instance, the steel industry association UK Steel warns that to minimize expenditure on energy, steelmakers will be halting work during peak hours. We see a similar trend among the chemicals industry as well, with 2 fertiliser plants in Teesside and Cheshire having to shut down for the winter, with another in Hull to
cap production to 40% of the maximum. A by-product of the fertiliser production is CO2, a gas used in a wide array of industries from meat production to food and drink, reduced fertiliser production inevitably hampers the output levels of other industries, only compounding a growing supply problem. 10 The struggle of firms brings me to my next point, the struggle of consumers in what is a cost of living crisis, whose driving factor is energy prices, that is likely to persist well into next year and raise inequality and poverty across the UK. There never has never been a greater discrepancy between pay growth and inflation since
records began more than 20 years ago, with the real value of pay continuing to fall faster than at any time since records began in 2001. 11 When soaring food (having increased by 12.7% in a year), oil and energy bills (having increased 3.5 fold) are factored into the equation, it is apparent that the income of many cannot keep up with their expenses. As a result, we will see significantly reduced household budgets: a study by the IMF shows that out of all of Europe, only Estonia and the Czech Republic will face a decline larger than that of the UK in its spending power (losing 8.27%). 12 While the cost of living and energy crisis will affect everyone in the UK, it will hit the poorest hardest. A study by the IMF showed that the poorest 10% will spend approximately 17.8% on energy this year, a stark contrast to the richest 10% which will only have to spend 6.1%. The difference between the two categories is also the greatest among the 25 European countries sampled by the IMF. Put in perspective, in France the difference is only 3.9%. With a growing wage gap and growing energy costs, fuel poverty will be a reality for many this winter: forecasts by the End Fuel Poverty Coalition show that on October 1 st , when Britain’s energy price cap will rise by 80% to £3,549 (dictating the bills for most households), roughly 42% of households will be unable to adequately heat and power their properties. 13
However, while it is clear that there are some bleak storm clouds looming as a result of the energy crisis it is only from the ashes of the old that the new life is born: the UK will be forced to confront and innovate its way out its dependence on fossil fuels. One of the UK government’s attempts to wean the
10 See https://uk.style.yahoo.com/manufacturing-sector-already-recession-energy-145435927.html. 11 See https://www.bbc.co.uk/news/business-62550069. 12 See https://www.theguardian.com/business/live/2022/sep/01/pound-falls-uk-recession-inflation-living- standards-slowdown-factories-energy-business-live?page=with:block-631052838f08a2989bf5457c; https://uk.finance.yahoo.com/news/factbox-energy-crisis-inflation-drives-141710003.html. 13 See https://www.aol.co.uk/news/uk-energy-bills-skyrocketing-why-084936459-140621389.html; https://uk.news.yahoo.com/energy-crisis-why-uk-worst-103654276.html; https://www.theguardian.com/business/2022/aug/09/uks-energy-crisis-response-could-include-winter-power- cuts.
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