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The coming energy price tsunami can knock even the sturdiest ships off course this year

The coming energy price tsunami can knock even the sturdiest ships off course this year

 Its main focus is the incident when the Ever Given cargo transporter crashed and blocked the Suez Canal - the world’s busiest shipping corridor - for a week leading to huge disruption in global supply chains.  It explores how shipping companies invest millions in sonar, weather radar and other systems to help predict obstacles on their […]


 
Its main focus is the incident when the Ever Given cargo transporter crashed and blocked the Suez Canal - the world’s busiest shipping corridor - for a week leading to huge disruption in global supply chains. 
 
It explores how shipping companies invest millions in sonar, weather radar and other systems to help predict obstacles on their course and other events that will hinder them - as well as continuing to use human lookouts. 
 
Despite these tools, they can still be literally blown off course by unforeseen events and obstructions so they have to adapt quickly and come up with a new way forward or else find themselves stuck in one place at best or possibly in danger of sinking at worst. 
 
The news of forthcoming energy price rises in the UK from April is the equivalent of a severe storm warning. 
 
Businesses have little time to come up with a plan on how they will weather an increase of 50% or possibly even higher. 
 
Millions of customers will see their domestic energy bills rise as the energy price cap was confirmed to be rising by nearly £700 taking the average default tariff bill close to £2,000. 
 
The cap is also expected to rise again in October although sector regulator Ofgem have announced a policy consultation this week canvassing views and opinions on moving the sector to a quarterly cap level review rather than biannually. 
 
They argue that this will see customers seeing smaller rises occurring in increments throughout the year rather than a huge increase twice a year. 
 
Mark Bennett of energyhelpline.com said: “Last year’s wholesale energy price crisis, which saw costs increase nearly ten-fold by December, really caught the energy industry unawares resulting in 29 suppliers either entering administration or going into liquidation
 
“Ofgem has reacted by making a series of changes to the price cap methodology, which means that from April and in times of significant upheaval, the price cap can be amended outside of the normal price cap cycle. In theory this would work both when wholesale prices are rapidly increasing, as well as when they are tumbling.”
 
The government is scrambling to find measures to offset the incoming price shock and is proposing a £200 loan to be repaid over five years and a one-off £150 reduction in council tax for bands A-D. 
 
None of which will be applicable to businesses but will instead fall entirely on their workforces and customers instead. 
 
The implications for consumer facing business sectors such as retail or hospitality are clear. A huge and sudden increase will probably see an immediate reduction in discretionary spending. 
 
Businesses in recovering sectors suddenly facing huge cost increases themselves along with customers having less disposable income is a problem. 
 
Additionally, companies will immediately face wage pressure from staff struggling to keep the lights and heat on at home at the same time as they will be juggling other incoming cost increases such as higher business rates, the end of VAT discounts in some sectors as well as increased transport costs and economy-wide labour shortages. 
 
This is in addition to a rise in National Insurance Contributions of 1.25 percentage points while many local authorities are planning to increase their business rates to cover other shortfalls in essential services including social care. 
 
Chris Horner, Insolvency Director with BusinessRescueExpert said: “Many companies have the conditions of a perfect financial storm heading right for them this April.
 
“Businesses on fixed energy deals will see them coming to an end and the marketplace for new deals will be minimal, if one exists at all. 
 
“26 energy suppliers have failed and gone out of business in the previous six months alone and there’s no guarantee that more won’t follow this year.
 
“Some business owners or directors will be paying close attention and will already be looking at savings that could be made through reducing planned investment or putting off recruitment decisions.
 
“No matter what they decide, one smart use of time right now is to get some professional advice on what can be done to strengthen their businesses before the wave of energy price increases and any other unforeseen obstacles hole them beneath the waterline.”
 
A good captain can avoid most foreseen problems facing their vessel and a lot of unknown ones too by taking a prudent approach.  
They will make repairs and course adjustments when they need to and won’t go full steam ahead into unchartered waters either.  
 
The best leaders will also seek advice and counsel when they aren’t entirely sure which way to go - which is where we come in. 
 
We offer a free consultation to any business owner or director who wants to explore their horizons and get some clearer ideas about what lies between where they are and where they want to go. 
 
They’ll also be able to accurately appraise any threats to their firm and learn about what they can do to mitigate and overcome them in the closing window of action available to them.
 
The final lesson we can take from the story of the Ever Given is that even if every right decision is taken - things can still go wrong but the effects might be even worse in that scenario. 
 
Which is why we’re always available to help - before, during or after running aground. 

Business Rescue Expert is part of Robson Scott Associates Limited, a limited company registered in England and Wales No. 05331812, a leading independent insolvency practice, specialising in business rescue advice. The company holds professional indemnity insurance and complies with the EU Services Directive. Christopher Horner (IP no 16150) is licenced by the Insolvency Practitioners Association

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