A third government official said the hope is that consumers are protected for a while because Britain’s energy price cap — a limit on the amount suppliers can charge for each unit of gas and electricity — is locked in for the next three months.
But they acknowledged there would be pressure to replicate several support schemes drawn up after Russia’s invasion of Ukraine, even as they cautioned that the need for such a move is a long way off.
Treasury Minister Lucy Rigby met insurance firm Lloyds of London Wednesday to discuss how the sector is being affected. A fourth Whitehall official said that while commercial insurance remains available, additional premiums may be needed for vessels transiting these areas.
A jump in energy prices could, in turn, hold back the Bank of England from continuing on its path to reducing interest rates, economists have warned – something that would represent a significant blow to Reeves and the government’s wider battle with inflation.
The National Institute of Economic and Social Research think tank has carried out analysis which finds that if the shock to energy prices is more than just temporary, the U.K.’s central bank may have to go in the other direction — raising the all-important Bank Rate from its current 3.75 percent rate to back above 4 percent.
“The Bank of England will have to contend with a shock to global energy prices, with the question of persistence hanging over their heads. This will cause problems for Rachel Reeves as financing costs increase, putting further pressure on an already precarious fiscal outlook,” said the NIESR’s Ed Cornforth.
Mason Boycott-Owen and Charlie Cooper contributed reporting.