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Industry reacts to Truss energy plan

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Companies will also have a bill cap for six months, which Quilter Cheviot equity research analyst Tom Gilby said was welcome as thousands of companies would face big bill increases from next month.

No additional support was announced for those most vulnerable to price rises.

It is Truss’ first major political statement since winning the Tory leadership race on Monday (September 5) to become the new prime minister.

Gilby said energy companies would benefit from the package by being able to lock in higher profits, it was less clear who would bear the costs and the Trust maintained its stance on no tax cuts.

“It’s unclear how this will be resolved given the debt already taken on during the pandemic. Whether it will prove popular with an increasingly sophisticated and skeptical public remains to be seen,” he said.

In pursuit of energy independence: a different energy solution

He added that another point in the Tras plan is the lack of a strategy to actually reduce gas demand and use.

“This could be a good opportunity to come together as a nation and make fundamental changes in our behavior to help us get through this crisis,” he said.

JP Morgan Asset Management global market strategist Hugh Gimber said the heavy weight of natural gas in the UK’s energy mix, combined with a heavy reliance on foreign imports, made the economy highly over-reliant on foreign energy.

“Medium-term solutions should focus on revising the energy mix, but an immediate response was absolutely essential to protect consumers and corporations from the full impact of this shock,” he said.

He did add that the package would ensure that UK inflation is now likely to peak below and the risk of another spike in electricity bills next January will be averted, although “tighter price pressures” outside the energy mix could increase from for the non-target nature of the support.

Rising energy prices create greater potential for clean energy

Suzanne Streeter, senior investment and markets analyst at Hargreaves Lansdown, said it will probably be disappointing that this is only a temporary relief.

“In the latest ONS business snapshot, resource price inflation and energy prices remain the top two concerns in October. More than a fifth of companies are in market power and use variable electricity tariffs, while a further 10% said fixed or hedged deals would end by the end of the year.

“As a result, almost a third of firms are highly exposed to huge spikes in electricity prices. Almost one in seven firms are also dealing with fluctuating gas rates and with costs hitting new records, a situation likely to have led to many sleepless nights. Unsurprisingly , that there are warnings of a massive collapse of business in the hotel sector, given the whirlwind of price hikes,” she said.

Emma Mogford, head of the Premier Miton Monthly Income fund, said in the near term the household electricity freeze would lead to higher consumer spending and that because the energy freeze had reduced inflation, interest rates “may not rise as much” which would help reduce household debt. farms and enterprises at a “more affordable level”.

“This is good news for UK companies, their share price has fallen this year. However, government borrowing is no longer free, and significant additional debt will squeeze public finances in the coming years. This could eventually lead to higher government borrowing costs. in the future and less money available for other parts of the economy. It is clear that the state’s involvement in the markets is growing, and this will have significant implications for investment,” she said.

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