With the polling complete, the citizens of the UK voted to leave the European Union by 52 per cent to 48 per cent.
In the wake of this decision, markets have been plummeting, the value of sterling has dropped to 31-year lows, uncertainty reigns, and the main UK political parties are in chaos.
What hasn’t yet become clear is what utilities, British business and the nation as a whole wants and needs to know: what happens next?
Short-term fears, linked to the tumultuous state the financial markets find themselves in and the political vacuum that has been created by David Cameron announcing his resignation and Labour’s front bench deserting Jeremy Corbyn, have unsettled utilities.
The UK, and in particular its regulated utilities, have been seen as a stable and secure place for investment, and as such have benefited from a low cost of capital. However, the Brexit vote has changed this because the whole UK plc picture has shifted.
Moody’s has said the uncertainty will have a negative effect on the UK’s credit rating, while Energy and Climate Change Committee chair Angus MacNeil told Utility Week: “There will be a premium for investment.”
Aside from the extra costs now placed on the utilities and their investors, the lack of political and legislative clarity is the other major concern.
Questions are being asked about the UK’s access to the single European energy market, how the UK-Europe interconnectors will run, the security of supply of Britain, the impact on the European-led water and environment framework directives, and how the vote will affect the UK’s climate change commitments.
While the Climate Change Act binds the UK to reaching its carbon targets, the Renewable Energy Association is leading calls from industry for the government to confirm the fifth carbon budget so the sector can have some visibility on how these will now be achieved.
Key water and environmental targets also potentially face an uncertain future and meanwhile a shadow has been cast over the UK’s standing as a global centre for research and development of new products and technologies – many of which will be essential for a transition to a sustainable low-carbon economy.
There’s no doubt the outlook is grim. But in the face of this, some experienced voices are already calling for industry to brace up and start working proactively to get the best results from its new future.
Chiltern Power’s director John Scott told Utility Week “there’s no luxury of sulking” and others have urged utilities to start pouring resources into the scenario planning and business modelling. Before 23 June, so many had assumed such work would become a stranded investment. How wrong we all were.
“The UK now looks small-minded and distrustful of others. Do you want to go to a country with that attitude? So you can imagine a higher cost of energy as we continue along that path.”
Angus MacNeil, chair of the Energy and Climate Change Committee
“This result raises serious questions for investor certainty, energy security and much-needed investment in the UK’s energy infrastructure. Energy policy must be a priority for the government now.”
Nina Skorupska, CEO, Renewable Energy Association
“Whatever government emerges in the aftermath of the leave vote, it will need to clarify its policies with respect to climate change, renewable energy, technology preferences, state aid and many other matters of direct relevance to the utility industry, and to its investors.”
Tony Ward, head of power and utilities, EY
“Anybody who says they know exactly what’s going to happen in the coming days, weeks and months is kidding you because nobody is going to know what happens.”
Mike Foster, chief executive, Energy and Utilities Alliance