Britain faces a prolonged energy squeeze as European gas prices surge more than 150 per cent this year and dwindling reserves threaten to keep costs high through winter.
The price rise brings the prospect of higher household bills, renewed inflation and further pressure on its fragile economy before the October 28 Budget.
Underground gas storage in Britain was just 48 per cent full at the start of October, compared with 94 per cent in Portugal and 99 per cent in Poland, according to figures reported alongside the latest winter outlook from the European Network of Transmission System Operators for Gas.
Britain has historically relied on imported gas rather than extensive domestic storage. In 2024, its storage capacity amounted to just 5 per cent of annual gas demand, compared with an EU average of 29 per cent, according to government figures. Its current capacity is equal to about seven days of average winter demand.
Centrica, the owner of British Gas, has warned that its Rough storage facility could close when its operating consent expires in April, unless the government backs its plans for the site. The company has proposed investing £2 billion ($2.64 billion) to redevelop the site, which accounts for about half of Britain’s gas storage capacity.
Britain is unlikely to run short of gas this winter, but its limited reserves leave it increasingly exposed to global supply disruptions and competition for liquefied natural gas, according to Neil Quilliam, associate fellow for the Middle East and North Africa at Chatham House.
“The greater risk is not a physical shortage of gas, but a period of tight supply, higher prices and increased competition for LNG cargoes if winter is unusually cold or if there are disruptions to Norwegian supplies or global gas markets,” he said.
Britain still benefits from North Sea production, Norwegian imports, LNG terminals and interconnectors with Europe, which should provide sufficient supplies under normal conditions, he said. However, “the margin for error is becoming uncomfortably small”.
European gas storage is expected to be just 75 to 78 per cent full by November 1, about 10 percentage points below the five-year average, as the Iran war continues to disrupt liquefied natural gas exports from the Gulf.
The supply constraints could persist into next year even if the Iran war ends, with analysts warning that competition for alternative LNG cargoes and the need to replenish depleted reserves could keep prices high. Even with average winter weather, north-west European reserves could fall to about 20 per cent by early April, according to the London Stock Exchange Group.
“It’s not just this coming winter that we are tight, but we risk being tight the next summer,” Yuriy Onyshkiv, an analyst at LSEG, told Reuters.
Entsog warned last week that strong LNG deliveries would be needed throughout the winter to maintain European storage levels.
EU gas storage was 72 per cent full at the start of October, compared with about 83 per cent a year earlier. Entsog’s central scenario has EU inventories falling to about 30 per cent by the end of March.
In its worst case – a severe winter combined with tight LNG supply and a halt to Russian pipeline flows – stocks would drop to 11 per cent, the level of the bloc’s remaining strategic reserves.
Britain’s electricity system is also under pressure. The National Energy System Operator issued a precautionary margin notice on October 6 as weak wind generation tightened available supplies, highlighting continued reliance on gas-fired power.
A further challenge comes on January 1, when an exemption allowing imports of diesel and jet fuel refined from Russian crude in third countries is due to expire. In the same month, the EU’s full ban on Russian LNG imports takes effect, which is expected to tighten European gas supply further.
Consultancy Cornwall Insight forecasts a 16 per cent increase in Britain’s annual household energy price cap to £1,999 in January, after a 4 per cent rise this month that took bills to a three-year high.
The outlook adds to pressure on Prime Minister Andy Burnham’s government before the budget, with limited fiscal room expected to constrain further support for consumers.