LONDON — British consumers paid an average of 75 pounds (about $94 USD) more last year than they did before the historical Brexit vote, according to a new study.
Researchers from the University College London (UCL) say if the referendum is finalized and the United Kingdom officially breaks from the European Union (EU), average energy costs could increase in the UK by 61 pounds per year (about $77 USD) or more.
The researchers found that energy bills increased overall by £2 billion in the UK in 2017 because the falling value of British sterling relative to the euro and the US dollar. The average wholesale prices for electricity and gas rose by 18 percent and 16 percent respectively in the year after the referendum — a £35 increase for electricity, and £40 for gas.
“We know that exchange rates fell after the EU referendum but we can now look at the effect this had on wholesale and consumer energy prices,” says lead author Dr. Giorgio Castagneto Gissey, of the UCL Bartlett School of Environment, Energy & Resources, in a media release. “The exchange rate depreciation plus the fact that energy prices are now much more volatile means consumers have been paying more and are facing even higher bills over the next several months.”
The variability of the wholesale gas price, which comprises 39 percent of the price paid by customers, rose by 60 percent the year after the Brexit vote.
The researchers analyzed the variability of the wholesale electricity price in the UK and the sterling-to-euro exchange rate between 2012 and 2017. They found that as the exchange rate fell dramatically after the referendum, the electricity price increased over the subsequent year, directly reflecting the resulting higher cost of energy imports.
“Forecasts always carry some uncertainty, but this research pinpoints historical fact: the referendum result, through its impact on exchange rates, has been the principal factor driving up UK household energy prices over the past two years,” says study co-author Michael Grubb, a professor in the UCL Bartlett School of Environment, Energy & Resources.
The full research report was published online in November 2018.