Iceland boss calls for profit cap on energy firms as prices surge

Richard Walker has urged the government to consider imposing a temporary cap on energy company profits, warning that households risk bearing the brunt of another price shock linked to the Middle East conflict.

The Iceland boss, recently appointed as a Labour peer and cost of living adviser, said ministers should examine limiting earnings for producers and retailers during periods of extreme volatility.

“I have asked the government to consider a temporary profit cap … to stop producers and retailers exploiting the crisis to make windfall profits at the expense of consumers,” Walker wrote in The Sunday Times.

The proposal would go further than existing windfall taxes by directly restricting profits during crisis periods, a move likely to divide opinion across business and government.

Walker said the intervention would be targeted rather than permanent, adding: “As executive chairman of a retailer, I have no problem with profit… But I do have a big problem with profiteering, especially when families are under real pressure.”

His comments come as energy markets remain volatile following escalating tensions in the Middle East, which have pushed Brent crude above $100 a barrel in recent weeks.

Prices briefly surged as high as $119 before easing back, while gas markets have also seen sharp swings after attacks on key infrastructure in the Gulf.

The disruption could amount to a significant supply shock, with millions of barrels per day temporarily taken offline, raising the risk of sustained inflation and slower growth.

Pressure builds on government as bills rise

The government has already summoned energy producers and petrol retailers to Downing Street, in what Walker described as a “shot across the bows”, warning against “opportunistic rip-offs”.

The Competition and Markets Authority (CMA) was also present, with ministers showing a willingness to strengthen its powers if needed.

Walker said regulatory pressure would need to remain constant to ensure companies do not take advantage of market instability.

The call for tougher intervention comes as households face rising costs across multiple fronts.

Forecasts from Cornwall Insight suggest the average annual energy bill could increase by more than £300, while wider economic pressures are building.

The housing market has also been hit, with banks and building societies withdrawing hundreds of mortgage products and raising rates to their highest levels in over a year, adding to affordability concerns.

Keir Starmer is expected to convene an emergency Cobra meeting this week with senior ministers and Bank of England governor Andrew Bailey to discuss further support measures, including a potential multi-billion pound package to help households manage rising bills.

Walker warned that the current situation risked repeating patterns seen in previous crises, where prices rise quickly but fall more slowly, leaving consumers exposed.

“This cannot be another moment when ordinary households take the first and hardest hit, and profiteers seize the opportunity,” he said.

Existing measures such as the energy price cap, fuel duty freezes and targeted support schemes are providing short-term relief, but are due to taper in the coming months, raising questions about longer-term protection for consumers.

Industry groups have previously cautioned against tighter profit controls, arguing that higher returns during price spikes are needed to support long-term investment, including in domestic supply and the transition to cleaner energy.

A windfall tax on North Sea oil and gas producers, first introduced in 2022 and later increased, has had limited impact on consumer bills during periods of global price volatility.

A profit cap would mark a more direct intervention in markets and a significant escalation in government involvement.