Why will energy prices rise? It all has to do with the value of the pound, which has been declining since the referendum result. This decline, in a nutshell, means that importing will become more expensive for UK energy companies.
Why should the energy industry be concerned by importing costs though? Well, it’s because the UK currently imports a huge amount of energy from Europe, in order to satisfy the high demand. This being the case, you can guarantee that they’ll pass these higher costs to customers. The fact that a new nuclear power station is being constructed at Hinkley Point might reduce the need for imported energy, but it won’t come close to eradicating it. Our energy infrastructure is supported by imported materials, especially from China, which will cost more to maintain to an acceptable level. Once again, these costs will find their way to the consumer. Could the Government intervene? There is one way in which the government could negate the effect of energy price rises, the eradication of VAT on energy – something that would become possible thanks to the lack of regulation from the EU. VAT on energy is currently at 5%. However the chances of this happening though are almost zero as the lost revenue is estimated at around £1.5bn.
How to protect against rising energy costs
You can limit the impact by ensuring that you’re on the best energy tariff. This can be tricky with the number of different tariffs offered by the Big Six – as well those offered by smaller energy providers. There is help available to help with sorting the wheat from the chaff.
It's easy to compare energy and switch tariffs online using online energy comparison tools such as PayingTooMuch, uSwitch and MoneySavingExpert. Input your details and you’ll get results. This can be a bit longwinded the first time you do it but if you keep a note of your details, future comparisons will be much more straightforward.
