It’s not the 1970s but the oil shock is still hitting consumers, businesses

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For Britons of a certain age, the oil price shock brings back memories of the 1970s, with food and fuel shortages, the government-imposed three-day week, blackouts, homework by candlelight, and rising inflation and unemployment.

The good news is that, according to an assessment by the independent Office for Budget Responsibility, the energy intensity of UK GDP has fallen by 70% since the mid-1970s, reflecting improvements in energy efficiency and the decline of heavy industry.

So even a prolonged rise in electricity prices should not see the UK economy suffer as it did in that decade.

In theory, as a country that still enjoys domestic oil and gas production, Britain should also be less exposed to the impact of higher energy prices than peers such as Japan and the major euro zone economies.

In practice, however, rising oil and gas prices have a negative impact.

This is because British electricity prices are higher than its peers. According to the International Energy Agency, the average price per megawatt hour of electricity in the UK in April was $110.56, compared with $92.89 in Japan, $88.98 in Germany, $44.19 in France and $26.48 in the US

Ministers blame this on Britain’s “low price” system, where the most expensive source of energy brought into the grid to meet demand sets the price for all generators unless those generators have agreed to accept a fixed price. That is currently natural gas – and it has brought windfalls to other generators, including renewable operators, not through fixed contracts.

Energy UK, the industry body, says the system works because the cheapest generating capacity is used first and notes that gas often sets the price “because it is often the flexible generation needed to meet demand when sources are low cost.” [like renewables] they are not available.”

The government, accused by many of raising electricity costs for industrial and domestic users alike, has recently announced plans to try to break the link between gas and electricity prices.

However, businesses that need energy are suffering.

Denby Pottery, one of Britain’s best-known manufacturers of china and tableware, went into administration in March, citing high energy and labor costs, and the government spending more than £1 million ($1.35 million) a day to keep British Steel, the country’s last producer of pure steel using a furnace, afloat.

Consumers are also feeling the pinch. Households already owe more than £4.4 billion to energy suppliers by June 2025, according to regulator Ofgem, with one in four estimated to be in arrears. Baringa, the expert, said about three-quarters of that is unprotected.

As Ofgem allows suppliers to get a share of the cost of bills from all bill payers, it means some customers end up paying more.

With energy costs high and fueling wider inflation – the Energy & Climate Intelligence Unit, a think tank, reported this week that UK food prices will be 50% higher in November than in 2021 – there are signs, as noted by the Bank of England last week, that Britons are starting to save more in anticipation of higher debt.

That doesn’t bode well for consumer spending in the coming months. Retailers J Sainsbury, Shoe Zone and WH Smith have issued profit warnings since the start of the Iran war, as have a number of housebuilders, including Crest Nicholson, Taylor Wimpey and the Berkeley Group.

It’s unlikely to be the last.

— Ian King

UK exports to the US fell by 25% after Trump’s ‘independence day’ tariff cuts. While UK exports remained low, imports rose in early 2026, leading to a trade deficit with the country’s biggest trading partner for three consecutive months.

The UK government is planning to allow airlines to consolidate flights as the cost of jet fuel rises. The temporary measure will allow carriers to combine schedules on routes with multiple flights to the same destination on the same day.

Trump drops Scotch whiskey tariffs ‘out of respect’ for King Charles. The Scotch whiskey industry employs around 40,000 people in Scotland, with whiskey accounting for 23% of all exports by 2025.

– Holly Elliott

MAY 8: Halifax house price index for April

MAY 12: Monitoring the sales of BRC stores in April

MAY 14: UK first quarter GDP data