No 1970s but oil shock still hits consumers, businesses

This report is taken from this week’s CNBC UK Stock Exchange newsletter. As you see? You can subscribe Here.

The good news is that, according to rumor, evaluation According to the independent Office for Budget Responsibility, the energy intensity of UK GDP has fallen by 70% since the mid-1970s; This reflects improvements in energy efficiency and the decline in heavy industry.

So even a prolonged rise in energy prices should not cause the UK economy to suffer as it did during that decade.

In theory, as a country that still enjoys some domestic oil and gas production, the UK should be less exposed to the impact of high energy prices than peers such as Japan and some key euro zone economies.

However, in practice, the increase in oil and gas prices has a serious impact.

This is partly because Britain’s electricity prices are higher than its peers. According to the International Energy Agency, average price In April, the price per megawatt hour for electricity in the UK was $110.56, in Japan it was $92.89, in Germany it was $88.98, in France it was $44.19 and in the USA it was $26.48.

Ministers blame this on Britain’s “marginal pricing” system, where the most expensive energy source brought onto the grid to meet demand sets the price for all generators unless producers agree to a fixed price. This is currently natural gas, and not on fixed contracts, which has generated windfall profits for other producers, including renewable energy operators.

Industry body Energy UK argues the system is efficient because the cheapest generating capacity is used first, noting that gas often sets the price “because flexible generation is often required to meet demand when low-cost sources are available.” [like renewables] cannot be used.”

The government has recently announced plans to break the link between gas and electricity prices, with the move towards net zero blamed by many for increasing the cost of energy for both industrial and domestic users.

However, energy-intensive businesses are experiencing difficulties.

Denby Pottery, one of the UK’s best-known porcelain and tableware manufacturers, went into administration in March, blaming high energy and labor costs. more than £1 million A deal worth $US1.35 million a day will be reached to keep British Steel, the country’s last producer of virgin steel, alive through energy-intensive blast furnaces.

Consumers are also feeling this pain. already households Had debts of more than £4.4bn Energy suppliers are due to be paid by June 2025, according to regulator Ofgem, with a quarter estimated to be unpaid. Consultancy Baringa said almost three-quarters of that not safe.

This means other customers pay more, as Ofgem allows suppliers to recover some of their debt costs from all bill payers.

Higher energy costs are fueling inflation more broadly – ​​the Energy and Climate Intelligence Unit, a think tank, reported this week that food prices are set to rise in the UK. 50% higher As the Bank of England noted last week, there are signs that Britons are already saving more in anticipation of higher bills.

This does not bode well for consumer spending in the coming months. Retailers J Sainsbury, Shoe Zone and WH Smith have issued profit warnings since the start of the war against Iran; as are a host of builders including Crest Nicholson, Taylor Wimpey and Berkeley Group.

These are unlikely to be the last.

-Ian King

UK exports to the US fell by 25% after Trump’s ‘liberation day’ tariffs exploded. While UK goods exports remain low, Imports of goods increased at the beginning of 2026, leading to a trade deficit with the country’s largest trading partner for three consecutive months.