Energy companies accumulated £30 billion in profit last year, with foreign magnates and other nations emerging as major beneficiaries, as per an investigation by the Unite union. The union contends that “excessive profits” have contributed to the persistence of high energy bills, costing the average household around £500 annually. Unite’s general secretary, Sharon Graham, expressed frustration, stating, “It’s time to take control of this situation.”
Among the union’s suggestions is the idea of nationalizing the energy system, a proposition that may be viewed as unconventional by some. Unite argues that the estimated cost of approximately £90 billion for this endeavor is equivalent to the profits generated over three years.
The analysis conducted by Unite focused on the financial records of 165 companies, comprising about 70 major power generation firms, an equal number of energy suppliers, and 23 entities engaged in gas and electricity transmission and distribution. The research was confined to companies with licenses from industry regulator Ofgem for operations in Britain. The study revealed that the average pre-tax profit margin in the industry last year stood at 23%, significantly higher than the typical margin of 7.2% across various other non-financial sectors.
Gas producers were found to have the highest profit margin, averaging 53%, while companies supplying energy to households and businesses had the lowest margin, typically at 5%.
This comes at a time when energy bills for households and businesses are soaring. Unite points out that household electricity prices in the UK surpass the European average considerably, despite being among the lowest in the early 2000s. Moreover, the UK faces the highest industrial electricity costs among developed nations, posing challenges for local companies to compete with international counterparts.
In response to the escalating costs, the Labour party recently announced measures to assist some of the country’s most energy-intensive businesses, such as steel, glass, and cement manufacturers, by offering a more generous 90% discount on their electricity network charges, a move expected to yield savings of £420 million from the following year.
With declining gas reserves from the North Sea, the UK now heavily relies on imports, with over 40% sourced from Norway. Due to Norway’s predominantly state-owned gas market, a significant portion of the profits, approximately £5.9 billion last year, is channeled back to the Norwegian government. The increased importation of liquefied natural gas means profits are also predominantly directed to the US and Qatar, according to the report.
In the realm of electricity supply, EDF oversees the UK’s nuclear power station, being state-owned by France. Similarly, Orsted, heavily engaged in UK wind farms, is over 50% owned by the Danish government.
Unite also delved into the influence of affluent individuals in the ownership of the UK’s energy sector, revealing that companies they control or have stakes in amassed profits worth £4.2 billion last year. Notable figures include Li Ka Shing, Hong Kong’s wealthiest individual and a major shareholder in UK Power Networks, and Czech billionaire Daniel Kretinsky, whose empire now oversees Royal Mail and EP UK Investments, operating several power stations in the UK.
Despite criticisms of Labour’s net zero agenda, Unite emphasizes that the cost of environmental levies accounts for only a third of the profits generated. Ms. Graham emphasized the need for public ownership to regain control of the energy system, advocating for an end to deregulated markets in favor of a comprehensive Industrial Strategy.
Dhara Vyas, CEO of trade body Energy UK, stressed the importance of investing in critical national infrastructure within the energy sector, highlighting its role in ensuring a stable energy supply, driving economic growth, and providing warmth and light to households. The industry’s investments in 2024 amounted to £24 billion, marking a 28% increase from the previous year, with one in 25 UK jobs linked to the energy sector. Vyas warned that without a supportive regulatory and policy framework for private investment in clean energy, the UK risks heightened dependence on volatile global fossil fuel markets, exposing households and businesses to uncontrollable price fluctuations and jeopardizing future energy security.