CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70% of retail investor accounts lose money when trading CFDs with this provider.You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.

National Grid and SSE dividends under threat

UK energy networks have long been a haven for investors looking to make steady returns on their investment, but in the wake of consumer-focused regulatory changes shareholders could see dividends slashed.

Last week the UK energy regulator OFGEM slashed allowed returns for several network companies including National Grid and SSE.

The regulator’s proposal will significantly reduce the amount payable to shareholders, with the current 7%-8% currently permissible reduced to between 4%-5.6% over the next five years starting from 2021.

Energy networks make ‘eye-watering’ profit margins

Two years ago, the consumer group Citizens Advice claimed that energy networks in the UK were benefitting from ‘eye-watering’ profit margins of nearly 20% at the expense of consumers.

‘Energy networks have been able to overcharge customers by £7.5 billion under the current price control,’ Citizens Advice CEO Gillian Guy said.

‘The regulator will face intense industry pressure to water down these measures in the coming months.

‘It must hold its nerve and deliver a price control which is good value for consumers,’ she added.

However, many energy companies like National Grid and SSE contend that costs to consumers have fallen significantly since privatisation with power outages reduced by 60% as the result of major network investment.

Labour renationalisation threat applies pressure on UK energy sector

OFGEM’s crackdown will put significant pressure on companies operating in the sector at a time when calls for renationalising UK energy networks are growing louder.

Energy networks ague that the myriad of headwinds the sector is having to deal with will hurt its chances of meeting decarbonisation targets by 2050 and invest in the country’s energy infrastructure.

Citizens Advice, however, argues that there is ‘no evidence introducing fairer prices for customers will risk lower levels of investment in decarbonisation and electric vehicles’.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

See an opportunity to trade?

Go long or short on more than 17,000 markets with IG.

Trade CFDs on our award-winning platform, with low spreads on indices, shares, commodities and more.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only

Plan your trading week

Get the week’s market-moving news sent directly to your inbox every Monday. The Week Ahead gives you a full calendar of upcoming economic events, as well as commentary from our expert analysts on the key markets to watch.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.