CNBC’s UK Exchange newsletter: It’s not the 1970s, but the oil shock is still biting hard

This report is from this week’s CNBC’s UK Exchange e-newsletter. Like what you see? You may subscribe right here.

For Britons of a sure age, an oil worth shock brings again reminiscences of the Seventies, with meals and petrol shortages, the state-imposed three-day working week, energy cuts, doing college homework by candlelight, and the ensuing will increase in each inflation and unemployment.

The excellent news is that, in accordance with an evaluation by the impartial Workplace for Finances Duty, the vitality depth of U.Ok. GDP has fallen by 70% since the mid-Seventies, reflecting enhancements in vitality effectivity and a decline in heavy trade.

So even a chronic rise in vitality costs ought to not see the U.Ok. economic system endure because it did in that decade.

In idea, as a rustic still having fun with some home oil and fuel manufacturing, Britain must also be relatively much less uncovered to the impression of upper vitality costs than friends resembling Japan and a few main euro zone economies.

In observe, nonetheless, the oil and fuel worth surge is having a dire impression.

This is partly as a result of Britain’s electrical energy costs are larger than these of its friends. In response to the Worldwide Vitality Company, the common worth per megawatt hour for electrical energy in the U.Ok. in April was $110.56, in contrast with $92.89 in Japan, $88.98 in Germany, $44.19 in France and $26.48 in the U.S.

Ministers blame this on Britain’s “marginal pricing” system, beneath which the costliest supply of vitality introduced onto the grid to fulfill demand units the worth for all turbines until these turbines have agreed to just accept a set worth. That is presently pure fuel — and has delivered windfalls for different turbines, together with renewables operators, not on fastened contracts.

Vitality U.Ok., the trade physique, argues the system is environment friendly as a result of the most cost-effective era capability is used first and notes that fuel usually units the worth “as a result of it is sometimes the versatile era wanted to fulfill demand when lower-cost sources [like renewables] are unavailable.”

The federal government, whose sprint to web zero is blamed by many for pushing up the price of energy for industrial and home customers alike, has simply introduced plans to try to break the hyperlink between fuel and electrical energy costs.

Nonetheless, energy-intensive companies are struggling.

Denby Pottery, one among Britain’s best-known producers of china and tableware, went into administration in March, blaming excessive vitality and labour prices, whereas the authorities is spending greater than £1 million ($1.35 million) per day to maintain British Metal, the nation’s final producer of virgin metal by way of energy-intensive blast furnaces, alive.

Customers are additionally feeling the pinch. Households already owed greater than £4.4 billion to vitality suppliers by June 2025, in accordance with the regulator Ofgem, with one in 4 reckoned to be in arrears. Baringa, a consultancy, has mentioned almost three-quarters of that is unsecured.

As Ofgem permits suppliers to get better a proportion of debt prices from all billpayers, it means different prospects find yourself paying extra.

With larger vitality prices additionally fuelling inflation extra broadly — the Vitality & Local weather Intelligence Unit, a assume tank, reported this week that U.Ok. meals costs will likely be 50% larger by November than they had been in 2021 — there are indicators, as famous by the Financial institution of England final week, that Britons are already beginning to save extra in anticipation of upper payments.

That does not bode properly for shopper spending in the coming months. Retailers J Sainsbury, Shoe Zone and WH Smith have issued revenue warnings since the conflict on Iran started, as have a clutch of housebuilders, together with Crest Nicholson, Taylor Wimpey and Berkeley Group.

They’re unlikely to be the final.

— Ian King

UK exports to U.S. plunge by 25% after Trump’s ‘liberation day’ tariffs blitz. Whereas U.Ok. exports of products have stayed low, imports of products elevated at the begin of 2026, resulting in a commerce deficit with the nation’s largest buying and selling associate for 3 months in a row. 

UK authorities plans to permit airways to consolidate flights as jet gasoline prices soar. The short-term measure would permit carriers to consolidate schedules on routes with a number of flights to the identical vacation spot on the identical day.

Trump scraps Scotch whisky tariffs ‘in honor’ of King Charles. The Scotch whisky trade employs round 40,000 folks in Scotland, the place whisky accounted for 23% of all items exports in 2025. The sector is additionally a serious purchaser of used bourbon barrels from the U.S.

— Holly Ellyatt

MAY 8: Halifax home worth index for April

MAY 12: BRC retail gross sales monitor for April

MAY 14: UK first-quarter GDP information