Brexit: the initial reaction

Published 24 June 2016

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Brexit: the initial reaction

The UK has voted to leave the European Union. The country chose Brexit by a margin of 52 per cent to 48 per cent.

David Cameron has announced he is to step down as prime minister. Speaking outside 10 Downing Street he said we would stay to “steady the ship” over the coming weeks and months but said “fresh leadership” was ultimately needed. 

On international currency markets the outcome of the referendum led to a collapse in the value of the pound. After trading at almost $1.50 yesterday afternooon it fell to below $1.35 this morning – a drop of around 10 per cent – although it has recovered slightly since. 

Here’s some of the initial reaction from the utilities sector:

Mike Foster, chief executive, Energy and Utilities Alliance

“Our organisation, which is a membership organisation, was firmly in support of the UK remaining in the EU, so I suspect those members are going to be disappointed with the outcome but now we are in uncharted territory.

“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.

“In the short term there’s undoubtable going to be some volatility in the next couple of days. What happens in the medium and long term is what our members are really going to be concerned about.”

Jonathan Gaventa, director, E3G

“This is a pretty fundamental decision for the UK and EU as a whole and energy and climate policy don’t escape that… The results could be relatively far reaching.

“That said on climate policy it’s been clear that most of the UK’s climate policy has been driven more by domestic legislation in the Climate Change Act rather than EU legislation. There’s no reason to expect a change in direction on climate policy any time soon…

“For the energy sector it’s looking at bit more challenging for investment in any form of major infrastructure.”

Nina Skorupska, chief executive, Renewable Energy Association

“This result raises serious questions for investor certainty, energy security and much needed investment in the UK energy infrastructure.

“Energy policy must be a priority for the Government now, with industry needing reassurance and ministerial clarity on priorities. The first in this list must be confirmation of the 5th carbon budget, which will hopefully give some confidence in the long-term direction of UK energy policy.

“The vast majority of our members had fears of Brexit, and we will be consulting with them and government in the coming weeks to set out a plan for continued low carbon energy investment, deployment and assurance of the 117,000 jobs in this sector.”

Tony Ward, head of power and utilities, EY

“Being an island with limited interconnection to the continent, the UK has out of necessity had to meet its energy needs, from electricity generation through to water distribution, largely from its own UK-based resources and assets. Demand for these services is not likely to change materially, despite the vote to leave the EU, and the UK-based industry will continue to meet that demand.
                                                                        
“However, the UK has become increasingly dependent on the import of fuel and technology to construct and operate assets. If, as expected, sterling declines in the FX markets, the price of these imported resources may rise, increasing the costs to end users of energy in particular.
                         
“The vote to leave the EU will also likely make its impact felt by creating an immediate heightened level of policy and regulatory uncertainty. 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.”

SSE spokesperson

“The result of the EU referendum presents no immediate risk to how SSE serves its customers or to the investment that it continues to make in order to fulfil its core purpose. The level of risk may, however, increase if the vote to leave leads to a prolonged period of uncertainty about the legislative or regulatory framework that SSE operates within.

“It is not yet clear how this matter will now progress, but SSE believes that the UK Government should be mindful of the importance that the harmonisation of the GB energy market with the countries in Europe can have on efforts to deliver clean, secure and affordable energy…

“SSE agrees with the UK Government that collaboration with other European countries on energy matters is important for UK consumers. It therefore hopes that the UK Government and the European institutions will provide clarity on future plans for the UK’s involvement in the IEM.”

David Wadham, utilities partner, Ashurst

“The outcome raises so many question for the UK power industry, and in particular the renewables sector that it is vital that the Government takes swift action to ensure there is sufficient certainty to allow power companies to make investment decisions.

“In particular developers need clarity on any impact on the next CfD allocation round scheduled for later this year.”