UK utilities under pressure after Severn Trent shocks market
UK water utility company Severn Trent has today shocked the market with the announcement that falling commercial consumption will see revenues up to £25 million lower compared to last year, even though the company recently forecast a decline of just £15 million. This announcement has spooked investors and spooked the market at a time when utilities were seen by many as a safe haven in these stormy times.
The announcement by Severn Trent had a knock-on effect to the whole sector with prices across the board heading downward. There are also concerns that the fall in commercial consumption could lead to a possible balancing in pricing and see domestic bills head high yet again. The UK utility sector has come under serious pressure and serious criticism over the last few months as domestic customers struggle to cover their bills at a time when companies were announcing record profits.
The last 12 months have seen a substantial increase in energy costs across the UK and while recently we saw the likes of British Gas announced a 10% reduction many believe this is too little too late for those on the breadline. It will be interesting to see how the regulator views the fall in commercial demand for the likes of Severn Trent and what implications this has for the pricing structure of the sector.
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