We do not know whether the government will get the current proposed Brexit deal accepted or not, however with both the UK government and the EU27 members wanting to avoid a no deal scenario, all signs point to a deal of some kind. Whilst uncertainty is always unsettling, we are not overly concerned about the impact of Brexit; independent PWC analysis states that the effects of Brexit on the global energy markets will likely be minimal – and we strongly agree with this conclusion. We believe there are three main areas that our customers want reassurance on:
Security of Supply
We get most of our product from our own supply terminals at Mossmorran and Stanlow, and only import product from Europe in exceptional circumstances. Therefore we do not anticipate any disruption in your supply of LPG due to Brexit.
There may be a short-term impact on the cost of LPG due to the exchange rate (LPG is purchased in dollars). However we have already seen this to an extent due to the weakened pound as a result of the uncertainty of the Brexit outcome. Once the outcome has been confirmed, the impact on the pound could be strengthened and bring down the cost of LPG.
Energy Taxes / Compliance
Conversations we have had with government indicate that the energy taxes we currently pay, such as VAT, CC and EU ETS, will continue.
EU targets which have been set in relation to carbon reduction will continue, but the UK will have more freedom and budget available to achieve these targets. As the UK has already signed up to the Paris Treaty to reduce carbon emissions, this is now bound in UK law regardless of whether we are in Europe or not.
There are a number of useful resources available to help companies prepare for Brexit. Please find some useful links below:
The UK will continue to have a VAT system after it leaves the EU. The revenue that VAT provides is vital for funding public services. The VAT rules relating to UK domestic transactions will continue to apply to businesses as they do now. If the UK leaves the EU with no deal, the government’s aim is to keep VAT procedures as close as possible to what they are now, in order to provide certainty and continuity to businesses.
Climate Change Levy:
The Climate Change Levy is part of the UK government’s policy designed to support the EU ETS. Leaving the EU ETS could result in the introduction of a single coherent carbon pricing system across the entire UK economy, rather than three separate carbon pricing policies: EU ETS, Carbon Price Floor and Climate Change Levy. However, the CCL has been frozen on LPG until 2022, so we would not expect any significant changes before this point.
The EU ETS covers 11,000 industrial installations across 31 countries. Each participating installation is provided with a maximum amount of emissions it is allowed to produce. Following the allocation of allowances for emissions, participants are free to trade these with others. Consequently, there is a financial benefit to not using an entire emission allowance as any surplus can be sold for profit.
The UK could remain part of the EU ETS (although it is unlikely in a no deal scenario), adopt a Norwegian model which is linked to EU ETS, or establish its own similar model or separate entity. However, given the UK’s commitment to reducing carbon it is extremely likely it will continue to tax large scale energy consumption.