German energy giant Eon has lost no time in wielding the axe at its ‘English Patient’, Npower. As we learned at Thames Water in 2006, German utility bosses, far away from their UK offshoots, cut and run when the going gets tough.
Overseas owners are able to get away with this with impunity, whereas domestic operators such as Centrica find themselves directly in the line of fire.
As Centrica’s well-meaning chief executive Iain Conn discovered, there is no hiding place for UK-based public companies in a fast-changing energy market, and he is stepping down next year.
On the march: : Labour will doubtless see the sacking of 4,500 power workers in the UK as strengthening the case for public ownership
The big difference with Germany is that there are consequences for executives of UK-quoted enterprises, which are subjected to close scrutiny by shareholders, customers and the media. Overseas owners are subjected to much less examination, and find it easier to cut jobs far away across the North Sea rather than at home.
Labour will doubtless see the sacking of 4,500 power workers in the UK, less than a month before Christmas, as strengthening the case for public ownership. Eon, which acquired Npower as part of a complex swap of assets with another German utility RWE earlier this year, might view nationalisation as a relief.
Eon and RWE between them have wreaked havoc on UK energy security.
In 2012, the two companies retreated from a deal to build next generation nuclear plants at Wylfa on Anglesey, and Oldbury, near Bristol, after German Chancellor Angela Merkel decided there was no future for atomic power in Germany following the devastating accident at Japan’s Fukushima a year earlier.
Arrangements which lead to foreign governments having a veto over UK energy policy are unacceptable. That is among the reasons why there have been so many questions over Britain’s £22billion nuclear project at Hinkley in Somerset, which is being built by EDF and financed by China. Public ownership will resolve nothing. It would move losses at Npower from a German balance sheet to UK borrowing.
The current problems in the British power industry stem from meddling by Theresa May’s government.
Calls for nationalisation: Labour will doubtless see the sacking of 4,500 power workers in the UK, less than a month before Christmas, as strengthening the case for public ownership
Issues: The current problems in the British power industry stem from meddling by Theresa May’s government
Under pressure from former Labour leader Ed Miliband, and public complaints about energy prices, it effectively imposed a price cap. Such ill-judged interventions in free markets have unintended consequences.
As profits at the big six have declined, resources for new investment has also been hurt – including those earmarked for green energy.
The cap has also impacted on Britain’s highly competitive free market in energy, which offers consumers choice through commercially run switching sites. These have become so sophisticated that they can automatically move customers to the best value energy suppliers several times in any year.
In the first instance, the capped tariffs at the big six had the effect of driving fringe energy players out of business, offering less choice. More recently, as global oil and gas prices have floundered, the big six became uncompetitive against the 60 or so fleet-of-foot newcomers. The result has been that Npower lost 447,000 customers this year and Centrica some 3million over the past few years.
The free market has been doing what it should by offering consumers the best prices and clearer, more flexible, billing. It has also offered scope for British Gas, part of Centrica, to diversify into developing other income streams, such as installation of greener boilers and maintenance.
The diversified energy market can be brutal, and overseas ownership has been a huge mistake in terms of command and control of the UK’s own energy security. But it has forced the main players into becoming more efficient and effective in serving the needs of customers.
Playing with fire
Another small corrective for the Corbynistas. When extolling the virtues of taxing billionaires and the wealthy, they often cite Sweden as an example of a more equal society.
Readers of Stieg Larsson’s financial thrillers will attest the reality is rather different.
Sweden has one billionaire for every 250,000 people, making it one of the world’s least equal nations in terms of distribution of wealth. Over the decades, Stockholm has tried wealth taxation with the result that some of the super-rich, including the Rausing Tetra Pak billionaires, came to the UK.
Sweden abolished inheritance taxes in 2005 and a wealth tax in 2007.
The result: late Ikea founder Ingvar Kamprad, a temporary exile, returned.
Who will win the election battle for the future of our finances?
One of the biggest election issues is the battle over the economy and our personal finances – and there’s a sizeable difference between Labour’s tax and spending plans for Britain and those of the Tories.
So what do all the election promises and plans mean for you?
On this podcast we dig into the Labour, Conservative and Liberal Democrat manifestos to find out.
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