United Kingdom: Selected Issues
IMF Staff Country Reports, July 11, 2023
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- United Kingdom: Selected Issues
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Bibliographic details
- Published: July 11, 2023
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9798400248658.002
Energy price shock — impact and assessment
- Analyzes the impact of the energy price shock on UK households and firms.
- Describes the energy support measures introduced by the UK government and provides IMF staff’s assessment of these measures.
- Retail energy prices in the UK have seen greater pass-through from wholesale prices than in regional peers.
Policy options and structural recommendations
- Proposes structural measures to ensure energy security and raise resilience to spikes in energy prices.
- Recommends refining support measures, especially improving the targeting of support that could be introduced in response to a possible resurgence in energy prices.
- Advises that broader business support should be targeted at viable but financially vulnerable firms and should focus on:
- limiting scarring, and
- facilitating the adjustment to higher energy prices.
Liquidity and moral hazard considerations
- Notes that liquidity support may be appropriate to enable energy providers to meet their margin calls while continuing energy purchases on wholesale markets.
- Stresses that support should be structured to prevent moral hazard by management and investors.
Key takeaways
- Focus on targeted, time-bound support for households and firms to shield vulnerable groups and viable businesses from temporary shocks.
- Strengthen energy security and resilience to reduce future exposure to wholesale price spikes.
- Consider liquidity mechanisms for energy providers alongside safeguards to avoid creating perverse incentives.
United Kingdom: Selected Issues — IMF Staff Country Reports (July 11, 2023).
Content in this bundle
- United Kingdom: Selected Issues; IMF Country Report No. 23/253; June 20, 2023