Energy price surge

29:15Wake Up To Money with Felicity Hanna. Good morning. If you're just joining us on Wake Up To Money, then welcome to the week. Welcome to a week that could be quite a busy one. It's looking like for oil and gas prices, for what we're seeing in the stock markets. There's a lot of movement, maybe a few more jitters this Monday morning about what that conflict in Iran is going to mean for all of us, for the world economy, for us here in the UK and for our pockets. Lots of you getting in touch on what you're thinking about, how you're seeing yourselves being affected. Joe says, I'm not watching my investments day to day.

29:53I don't expect any need to cash them in anytime soon. So what's the point in worrying about them? But Jeanette is worrying about them. She says, I'm thinking about the impact on a pension I will need to draw on in a few years or maybe sooner. But there's very little I can do without a crystal ball. If I had such a window on the future, I would be afraid to look. Thank you for those messages. Keep your thoughts coming, whether it's the cost of filling up at the tank, what you're thinking about prices in supermarkets, whether you're looking at your investments, whether you're booking flights. Get in touch.

30:22Let me know. You can text me on 85058. You can send me a WhatsApp message on 08085 909693. And you can use the hashtag WakeUpToMoney on social media. And I will keep an eye on that. There is, I suppose, we've touched on what it meant for energy markets after Russia's full-scale invasion of Ukraine already. But we also, of course, saw a huge amount of turmoil for energy markets during the COVID pandemic. It's been a tricky old few years, hasn't it? Now, in 2021, Bulb Energy, which had around one and a half million customers, was temporarily nationalised after going into administration. And it wasn't alone.

31:0330 energy suppliers went under between August 2021 and May 2022. So the question, of course, is, is the sector better prepared now than it was then? Let's ask Adam Bell, who's a partner at the energy consultancy Stonehaven and former energy advisor to the government. Adam, good morning. Good morning. What a morning. I was sort of up at three o 'clock and glued to all the various indices straight away trying to understand what was going on. I imagine you have been as well. Well, explain, though, why this sharp rise in wholesale costs can be such a headache, such a problem for energy suppliers, for the companies.

31:44Of course. So if you're an energy supplier, you'll be selling a lot of people around the country energy at a fixed tariff, either at the price cap level or a fixed tariff. You negotiate with them bilaterally. And what that means is you're in the hook for that cost for at least three months in the case of those on the price cap and perhaps a year on those slightly cheaper fixed tariffs. But all of a sudden, your costs have just spiked if you're buying LNG or if you're buying any other source of gas, especially as well if you're buying electricity, which, of course, is still largely set by the price of gas.

32:17Now, as we saw during the crisis, this can have incredibly challenging effects on these companies' ability to stay solvent. If your forward costs for the next six months are higher than your revenue, then you're going to go out of business unless you've got significant capital reserves. Okay. Have things changed since 2022? Are we likely to see then the same kinds of struggles for the sector that we saw then? Because the regulator has taken steps to reinforce it, hasn't it? Yes. So, of course, the regulator has obliged companies to increase the level of capital they hold, increase the kind of capital adequacy ratios.

32:56However, what's happened in practice is that some companies just simply haven't done this. They've said that they think that the hedge in which they've taken out, which might give them enough confidence that they're going to be able to stay in business, or they've said doesn't fit with their business model and push back against the regulator. So, there's a set of companies that today, I'm sure, often we'll be looking at and asking whether they really can stay solvent. So are you concerned? I think there is a risk that you see some of the less well capitalised companies go to the wall once again.

33:26But there really is, as I'm sure many of your other guests have said, a function of time. If this is a short-lived effect, then companies will be able to absorb it simply as a cost. If it lasts for two, three, four, five, six months, then yes, I think you'd probably see some suppliers go to the wall again. I mean, I've already asked, unfairly asked some of our guests on the programme so far for their sense. I'm going to unfairly ask you, is there a sense? Are analysts like you kind of working to an expectation for how long this conflict might continue? So there's some things we know, which is that Qatar has shut down its energy, its liquefaction facilities.

34:05That takes another two weeks to spin up. Kuwait has announced a drawdown in the amount of oil it's going to seek to export with an undetermined period after that. So that points to at least two weeks at, let's call them frothy prices. But if the conflict progresses beyond that, if further infrastructure is damaged, and certainly Iran has overnight said that it may in fact attack all facilities in the region, which would have consequent impacts for months, you could see probably around one or two months of disruption is my current bet. We've had listeners getting in touch, sort of arguing that we ought to be diversifying our energy here in the UK, which, as we've already touched on, is not something that can happen quickly.

34:48And the Department for Energy Security and Net Zero, they've told us that the UK has a diverse and resilient gas supply, so we're not as reliant on storage as some European countries, even though those European countries then have larger storage capacities they're trying to mitigate their lack of diverse supply effectively. And the spokesperson said Britain has eight gas storage facilities which provide a helpful form of flexibility during cold snaps. And in winter 24-25 gas storage was used to provide around 8 % of total gas used in Britain. That sounds like we're in a pretty good shape to kind of weather this storm, particularly, I suppose, as we're going into the milder months.

35:29I think that's quite a reasonable position to take. We get the bulk of our gas from the North scene, from Norway. The LNG that flows out of Qatar was only ever the kind of the almost marginal supply. We do get a lot of LNG from the States. And certainly if this conflict ends by the summer and we go back to business as normal, we'll be completely fine. If the conflict continues for about six or seven months, we get towards the autumn, especially as we get towards the American elections. My big worry is that the Americans decide that they want to lower their own consumer bills by offending LNG exports, which certainly would be in keeping with their more mercantilist approach towards trading.

36:07And at that point, there will not be enough gas flowing through the pipeline from Norway and from the North Sea to ensure that we've got enough to be going on with. We'll ask the department to consider what happens if the Americans start exporting. exporting. Gareth in Wales has message to say, in my opinion, maybe if we cut the net zero impossibility and focus on our own North Sea oil, our fuel may be cheaper in the first place. Adam, can you explain why that's not necessarily the case and why producing it closer to home doesn't necessarily bring down the cost? It's entirely because of two factors.

36:44First of all, how much we could potentially get out of the North Sea and secondly, where it's traded. Firstly, there's not just that much left. We've drained the North Sea nearly dry. You could perhaps eke out a little bit more and certainly it would help in the medium term if you thought you could get a little bit more of the North Sea. But ultimately, because oil and gas tends to be traded internationally, because prices will go to wherever they are highest, we will not necessarily impact the price for oil and gas in the UK just by producing more here. Okay. Ministers, including the Chancellor, have said that they're keeping a close eye on things, which I'm sure that they are.

37:20At what point might we start talking about policy intervention to help with affordability? At what point might ministers start to feel like they need to do more than reassure the public and actually intervene? I think it really does start becoming a question if this goes beyond kind of the Americans' initial frame for the operation, which is about four to six weeks. If you go much beyond six weeks at this pace of disruption, and if the American Senate will secure almost within six weeks, then I think you should assume that this becomes more of an enduring campaign. And I'm sure they'll be looking at similar numbers themselves.

37:57What's your outlook then, Adam? What are you going to be most focusing on in the coming hours and the coming days? So we're looking at the extent to which the government is willing to intervene in prices here, actions taken by the regulator to develop confidence in the liquidity of our energy companies. But I'm also going to be quite frankly looking at the details of the conflict too. To what extent has Iran still got capabilities to launch our heads and other sorts of munitions? To what extent are the Gulf states running out of interceptors? Those will tell you more about how long the conflict will endure and therefore the ultimately the disruption to our prices.

38:35Adam, absolute pleasure to talk to you. Thank you so much for making it so clear. Adam Bell there, partner at the energy consultancy Stonehaven, former energy advisor to the government. Giving us his view, what perhaps he might be thinking the government is thinking about. Something else the government might be thinking about is what is going to happen for the UK's trade. Later today, the Business and Trade Committee is going to be quizzing the trade minister, Chris Bryant, about the UK's trade with the EU, India and the US. Now, of course, the US Treasury Secretary very, very recently said Washington was likely to introduce a 15 % global tariffs on imports.

39:18The 15 % rate had previously been threatened by President Trump after the US Supreme Court struck down many of his nation-specific levies. Do you remember the chart with the different rates that he was hitting the different countries with? At the moment, though, the global tariff brought in to replace those remains at 10%. What does it mean for UK exporters? Exporters like the Scotch whisky industry. Let's talk to Annabelle Thomas, CEO of Nignian, a whisky distillery in Scotland. Annabelle, good morning. Good morning. How important then is the US market for your whisky? Well, the US is our third biggest market at the moment and Nignian is doing really well there.

40:04So we grew 37 % year on year to the end of 2025. Consumers there seem to really love what we're doing. We have a very fruity whiskey, which goes down very well. And I think they like the overall proposition as well. But clearly, the tariffs make things a little bit trickier. Probably a lot trickier. I mean, we're looking at, well, 12 months of the latest kind of threats and concern. What has it meant for your business? And when you hear this now, these threats of a 15 % tariff, what does that do to your business confidence, your ability to invest? Yeah, I mean, we've obviously been living with a 10 % tariff for a while now.

40:44And we made the decision to keep our retail price the same and absorb those, actually sharing the cost of them with our importer. So moving to 15 % is not a world away from that. It makes the business a little bit less profitable. but given our growth rates there we are still pretty excited about the market. I think what worries me more honestly than the 10 or 15 percent tariffs is what happens to the US consumer because if consumer confidence starts to drop that will probably have a much bigger impact on us than the tariffs themselves. Are you concerned then that the conflict if it's ongoing could affect the US consumers confidence or are you worried that tariffs will be pushing their prices up and they'll just have less cash?

41:26I mean, potentially all of them, right? The conflict in general, the impact on energy prices from the conflict and the general effect of tariffs may all have that impact. I mean, the good news is that we're still very small. And the US is a very big place. So in totality, I think Nick Nian's still got a big opportunity there. But there is obviously a lot of uncertainty in the world at the moment. Annabelle, stay with us. I just want to bring in Julianne Ponen, who's chief executive of Creative Nature, which makes allergy safe foods and baking mixes and is still with us. And Julianne, it's interesting, isn't it?

42:02Because you've actually pulled out of the US because of tariffs. So you're not as confident as Annabelle clearly is. No, I mean, I completely echo in terms of the market is huge. 32 million Americans have a food allergy. so it's a huge market for us but we've had to pull out because for example a baking mix landing on shelf in the UK is around£3,£3.50 for the consumer. At the moment if we supplied into the US with just the 10 % tariff that would land the baking mix at$12.99 for the consumer. It's just unattainable and we need to be sub$10 on shelf to be able to compete and even if we were to look at manufacturing in the US, this would take time and cost a lot of money.

42:48And by the time we were able to do it, would there be a new person in place? So you're looking ahead, looking at the long game. You've tried to replace your US exports, haven't you? We have. We've looked further afield and we are currently trading. We've just started trading with Japan, which is really exciting for us. We did a trade mission with the Department of Business and Trade last year in 2025 and within four months we secured a distributor and our stock is currently landing in market as we speak in one of the biggest retailers. And you're looking at Canada as well? Yes, Canada has opened up surprisingly.

43:26So we didn't actively pursue opportunities in Canada as we didn't feel that the market was ready for our product. However, after the tariffs were announced, we were inundated with calls from distributors, retailers in Canada looking for UK products. That's very interesting. Annabelle, that must be very interesting for you as well, because while you're in a very different kind of product business to Julianne, perhaps those trade markets could be opening up for you as well. Yeah, exactly. And I mean, I guess the thing about Scotch is that it's an exported product already. So, we kind of approach the business as if, you know, the UK is our biggest market, but export was always going to be important.

44:09And when the US tariffs were originally announced, we were already in 20 markets. So it wasn't as if we suddenly thought, well, we better pivot to other markets, because we were already in a lot of those markets. And the reality is that for Scotch specifically, which obviously can only be made in Scotland, the US does remain this huge market. I know the people people in America very often they they know their family roots and they they really connect with with a culture like Scotland. Absolutely and you know when I've been in the US with Nick Nian talking about what we do and where we're based in this beautiful part of the west coast of Scotland and they've tasted this lovely fruity whiskey a lot of them come up and say I really want to visit you know my family roots are in Scotland and yeah they definitely have a very special connection to the place.

44:56When I was a student in Edinburgh, I definitely met more Americans telling me they were Scottish than Scottish people. I suppose one of the difficulties, Annabelle, for you is, unlike Julianne, who, you know, it can take time to kind of scale up or open up a new factory in a different country if she wanted to. Scotch is not something that you can make overnight. You know, you've got to sort of be planning now for years in the future and market demand years in the future. How do you balance that with the uncertainty that we're seeing in terms of global trade and in terms of who might be in the White House?

45:34Yes, absolutely. And I think, you know, that is one of the trickiest things about starting a scotch distillery from scratch. And, you know, I started it over 10 years ago now, but from a background doing something completely different. And I think getting my head around the high capital investment and the long-term thinking was really tricky. The good thing, however, about Scott is that it all has to be made in Scotland. It has to be bottled in Scotland if it's a single malt, which we are. And there is no shelf life on it. So it ages and obviously age statements are highly prized. So whilst we do need to think 10 to 20 years ahead, we don't need a completely accurate forecast of what's going to happen on a year-by-year basis because we can still adjust as we go on a kind of longer term basis.

46:21What's your outlook then, Annabelle? Difficult times, lots and lots of difficult things to look at at the moment, like the cost of energy potentially rising. You still sound pretty upbeat. I think that's my general nature. I think if you start your distillery from scratch, you have to be optimistic. um you know i think what what will determine the next at least year for us will be more about what happens in the energy crisis and anything else that's not because we'll be particularly directly impacted by it we use only renewable energy um and that is timber that's sourced locally and we have bought like long-term supplies of that but of course energy affects everybody it affects consumers confidence it also affects everything else we have to buy um and i think that will probably make a bigger difference than whatever happens with tariffs.

47:14I'm not a global economist. I'm not going to make a forecast on what will happen with energy prices. But I think that's my biggest concern. We're all armchair global economists now, Annabelle. It's part of the brief, isn't it? Thank you so much for joining us. Annabelle Thomas, CEO of Nagnion, which is a whiskey distillery in Scotland. There's not much point sort of absolutely obsessing about oil prices as they move. But when we came on air, they were over, let me see, over$116 a barrel. They're now down to just below$108 a barrel for that Brent crude oil futures marker. So it's moving and it's at the moment, at the moment, easing off a bit compared to where it was just an hour ago.

48:02Right. It is not oil at all. It's not oil. It's not all war and oil. It is starting to feel a little bit, a little bit like spring might be on the way as well. We have had a couple of days of quite glorious sunshine and mild temperatures here in Media City over the last couple of weeks. I know it's been very, very varied across the UK. There are officially two types of spring, aren't there? There's meteorological spring and astronomical spring. We already passed meteorological spring, 1st of March. Astronomical spring comes on the 20th. This is not my subject area, can you tell? Either way, this is the time of year when temperatures start to rise.

48:46Everybody feels perhaps a little bit more upbeat and beer gardens begin to fill up, giving a big boost in business to any pub that has an outdoor space. So let's talk to one. We're joined now by Vic Stewart, Chief Financial Officer at The Alchemist, which owns 22 bars and restaurants across the UK, including one I can almost see from my window here on Salford Quays and one in Berlin. Vic, good morning. Good morning. How are you? Well, I'm sort of hoping the weather does improve because we do need it, don't we? But spring has officially sprung, according to meteorologists, at least. We saw some pretty good weather at times last week.

49:25Thursday was the hottest day of the year so far. What does that mean for your business? Well, it impacts straight away. I think especially at this time of year, if you can just get a nice few days, the mood of consumers is just so much more upbeat. Everybody sort of rushes outside. We have, as you mentioned, a great site at Media City in Manchester that has a very large terrace. We have a few other sites up and down the country with large terrace spaces and they instantly fill up when the sun comes out. So we love that. We have a few other sites in our kind of mix that do less well in good weather, but actually I think it's what it does for the mood of the consumers that's so valuable for us.

50:06Yes, everybody does feel just a little bit better when the weather is a little bit better, don't they? It's quite interesting talking to you about this now because on Friday we had that data from the BRC, the British Retail Consortium, about high street footfall. And they were saying it was really down in February and they were blaming the weather. They were saying one of the wettest Febuaries on record meant shoppers just didn't go shopping. They didn't get out and about to the high street or even to shopping centres. What does the wet mean for your kind of business? It's funny, really. I think in our business, we don't really like weather extremes.

50:45so if it's if it's really icy if it's really snowy if it's very wet even if it's if it's very hot it almost goes the other way I think I think for us we're quite happy with um weather being somewhere in the middle that kind of famous temperate climate that we're supposed to have here um but I think as I said at this time of year really sunshine just gives us that that first boost and and whilst trading is normally kind of at its worst really in hospitality through through January February, Valentine's aside, it starts to pick back up again in March. And then when you go into April, you've got Easter, you've got bank holidays in May, you've really got a lot more to look forward to.

51:23Yeah, they're all coming. They're all coming. The bank holidays are coming. In terms of your business then, do you watch the weather and sort of adjust your staffing? If you know that it's going to be a lovely mild weekend and that your beer gardens might be filling up, do you get on the phone and start booking more people to come in and work? Yeah, well, I mean, I would credit our general managers with that rather than me. But yeah, absolutely. Especially where you've got sites that have got a relatively large outdoor space compared to the indoor, they absolutely have to wear the watch. and I think it's just one of the many things that they have to juggle as well as potentially events going on, maybe theatre, concerts, a train station that's closed or all these different kind of localised events.

52:11It all plays into really the general manager and a very, very careful amount of staffing. Can the weather be too good then? If the weather is too good, do we all stay home and barbecue? Yes. We're a simple species, aren't we, humans? Yes, we'll take nice and sunny, but not too good. Okay, does it change what people are drinking when it starts to get more mild? It does. I think we sell a lot more, I think, pints, but also spritzes get really popular at this time of year. I think when the sun comes out. Yeah, exactly. You get an Aperol. We've got a Hugo Spritz or, you know, all sorts of different types of spritzes that you could order.

52:55But yeah, definitely a rush to the spritzes. OK. And really briefly, because we're almost out of time, do you find yourself having to heat those outdoor areas to kind of get people out and get using them? Or are you just relying on the sunshine? I mean, I don't love heating them because I feel like heating the air is not a brilliant thing to be doing. We do have haters available in some of our sites. So yes, sometimes, but preferably not. Preferably not, especially with energy bills going the way they are. Vic Stewart, thank you so much. Vic Stewart, their chief financial officer at The Alchemist.

53:28Thank you. Thank you also to Julianne Pohnen, chief executive of Creative Nature. Great to have you on the show this morning. Thank you to Sophie Hoon, portfolio manager and strategist at BNP Parabas Asset Management. Thanks. And thank you to you for all your messages for your company this morning. That's it for Wake Up To Money. Wake Up To Money from BBC 5 Live. That's it from Wake Up To Money. Don't forget to subscribe on BBC Sounds or wherever you get your podcasts. And when you do, we'd love it if you'd leave us a review. You can also contact us anytime on social media using the hashtag WakeUpToMoney.

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