Wednesday 05 August 2026
- Thought Leadership
UK Energy Sector Report: August 2026
Summary
- The 2025 view of an oil-glut in 2026 has reversed; after an April spike above $120, Brent Crude is back near $100 and National Balancing Point gas, the UK wholesale benchmark, near 150p/therm, - at conflict-peak levels.
- Ofgem’s 13% cap rise on 1 July turns domestic energy from drag on inflation into a contributor from Q3 2026; the new electricity VAT cut softens that shift slightly.
- The MPC held interest rates at 3.75% on 18 June; no cut now looks likely in 2026, and a rate hold into 2027 raises the cost of every low-carbon project.
- The North Sea decline is now capital-led – no exploration wells in 2025, capex set to fall to £9.19bn by 2031 – so the risk sits in the service chain.
- Refining and fuel distribution are the notable exposures: four refineries remain, around £400m of annual UK ETS cost, and a ~50p/litre diesel increase on unchanged facilities.
- Most energy credit risk sits outside the energy sector – in particular, manufacturers absorbing a ~45% rise in wholesale power costs they cannot pass on.
Andy Burnham became Prime Minister on 20 July; his early moves – an electricity VAT cut, North Sea approvals and water reform – reopen energy policies that looked settled.
Download the PDF version, click here.
