Shell threatening to leave the UK energy market
Shell, one of the biggest energy giants has announced they are currently reviewing their energy and retail division. Depending on what they find during this review they have announced that they may consider quitting their supplier side of the business which could cause issues in the UK energy industry.
The energy crisis in the UK has already caused over 30 energy supplies to go into administration over the past few years. This strategic review Shell is doing could lead them to find that their domestic energy business in the UK, Germany and the Netherlands could be costing more for them to run than they are making, which could run the supplier into the ground.
Shell has announced that is creating a new strategy which includes continually exploring performance issues and the options they have in such tough market conditions.
Although the retail division is struggling, Shell will most likely stay in the oil industry as they saw record profits in 2022 due to wholesale prices skyrocketing following Russia’s invasion of Ukraine.
The news that shell is thinking of quitting their supplier side of business comes just before they also announce they are going to be combining their oil and gas production with their LNG division as the company gets a new chief executive.
Shell are not the only supplier
Due to the news that Shell is considering leaving their energy supplier side of business behind and many suppliers failing over the past couple of years, people in the industry are considering whether the UK is in a period of declining appeal for energy suppliers.
There needs to be more of a pathway to profit for energy suppliers in the UK which currently there is not.
Ofgem has announced reforms in order to create more growth pledges and sustainable profit-making. Currently, business models in the industry are often based on the reliance on customers switching. They want to ensure that the market is attractive to invest in whilst also protecting customers from higher energy bills that domestic and business customers have suffered over the past couple of years. Ofgem plans to do this by evolving the current price cap to ensure flexibility where possible as well as making the sector more financially compelling for investors.
Shell is not the only supplier that is struggling to break even, many other big energy suppliers in the UK are saying they are struggling to compete in the UK’s current market and continue to make profits.
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