LONDON: British regulators Tuesday warned energy companies against exploiting elevated prices and told financial firms to avoid doing the same over surging interest rates, as stubbornly-high inflation fuels a cost-of-living crisis.
Energy bills rocketed, and remain high, after key gas producer Russia invaded neighbour Ukraine last year, sparking vast state subsidies to cushion the blow to consumers.
But such help has dwindled, leaving millions of Britons with bills still about twice the cost of gas and electricity compared with 18 months ago, even with temperatures warmer and the days longer.
Energy regulator Ofgem on Tuesday warned Britain’s domestic energy providers to retain profits to help cash-strapped customers — instead of rewarding shareholders with bumper dividends.
“Suppliers must reciprocate the support the sector was given by consumers and taxpayers when wholesale prices increased by behaving responsibly as prices fall and profits return,” Ofgem boss Jonathan Brearley wrote in a letter to providers. Ofgem said it “expects suppliers to act responsibly and in the interests of their customers” and would “take action” if it finds evidence of any breaches of its pricing rules.
UK annual inflation unexpectedly held at 8.7 percent in May, causing the Bank of England (BoE) to hike its key interest rate by a larger than expected amount.
At the same time, commercial lenders stand accused of ramping up their own loan rates and failing to boost savings rates, further hitting Britons in the pocket.
The Financial Conduct Authority regulator has summoned bosses from top UK banks to discuss concern over the treatment of savers.
Chief executives from Barclays, HSBC, Lloyds Banking Group and NatWest are expected to attend FCA talks Thursday.
The BoE lifted its interest rate in June for the 13th month in a row to five percent, as it sought to bring down inflation in line with its remit.
Government minister Jonny Mercer has slammed banks for “profiteering” by failing to pass on hikes to savers while hiking mortgage costs.
The average easy-access savings rate currently stands at only 2.43 percent, according to Moneyfacts.
Britons are struggling also with sky-high food inflation, while supermarkets selling petrol are profiting from high prices at the pump.
Spokesman for Prime Minister Rishi Sunak responded Monday by saying “it isn’t right that at a time when people are struggling with rising living costs, drivers aren’t receiving a fair deal for fuel and instead being overcharged by retailers”.
Britain’s competition watchdog is looking into accusations that supermarkets are profiteering from higher prices and whether wholesale price-reductions are being passed on fast enough.