Challenges for the energy sector challengers - ReSolve Group UK

Challenges for the energy sector challengers

ReSolve Group UK

Challenges for the energy sector challengers

As the world is emerging from the pandemic, new problems are arising, the most recent of which is a major shortage of gas supply which has led to escalating prices around the world. A lot of small energy companies here in the UK are questioning their future, as the cost of gas increases above the price cap they are able to charge their customers, thereby turning a once-profitable business into a loss-making one.

In recent years, small energy suppliers have been challenging the bigger energy companies whose market share has decreased to 70%. The challengers offered lower costs and better customer service, creating a fairer and more customer-centric UK energy industry.

However, from August to today, the surge in prices has so far caused fourteen UK energy suppliers to go out of business.  This is staggeringly more, in the space of a few months, than we have seen in previous years. Experts are predicting that the crisis is far from over.

As of 1 October 2021, OFGEM has increased the energy price cap by 12%, but this only goes so far to reduce the burden of the escalation in prices. Many suppliers are still operating at a loss.

To survive, energy business owners must take destiny into their own hands to ensure they are able to survive the crisis by managing the issues that they can control and mitigate the effects of the issues that are beyond their scope.

There is no silver bullet to getting a business back on track, but if you want your business to continue trading instead of becoming a statistic, then there are three things to consider today.

These suggestions will only be useful if business owners make and action their plans with sufficient lead time. This cannot be stressed enough because the sooner these are implemented, the more likely you are to survive the energy crisis and move back into the black. That said, the longer you procrastinate, the worse your position may become, with fewer options at your disposal.

The first task is technically the easiest, but psychologically the hardest: Review your numbers objectively and ask yourself if you have enough revenue coming in to cover all your costs at the current rate of trading. Do not fall into the trap of thinking things are about to turn around. Look solely at how you are trading today and project a bearish cash-flow model three to six months ahead. We often find that when it is your own company it is hard to see the wood from the trees, so taking a step back is integral for this process.

Whatever you discover while reviewing your numbers, next on your list is to call your stakeholders, including suppliers, investors and creditors and have honest conversations about where you are and what your expectation is for the next three to six months.

For those stakeholders to whom you are in debt, pick up the phone and discuss a realistic payment plan. We all know that sugar-coating helps no one, so to put yourself in the best position, you have to be honest, straightforward and, most importantly, realistic in your conversations.

Communicating with your customers and employees is also important. Of course, they will know what is going on as the energy crisis is covered regularly by the news but hearing it directly from the company will be much appreciated.

If, after looking at your books, you believe your business is not viable, you may wish to seek the advice of a professional to ascertain the options available – there are many, and insolvency is but one route and only ever needs to be taken if a business absolutely cannot be salvaged. Many businesses can be saved, especially if you are on top of your numbers and are honest with yourself and others. The earlier you catch any issue, the more time you have to rectify it.

At ReSolve we are a solutions-led business and will review every possible avenue before proposing a plan of action. If you feel you cannot see the light at the end of the tunnel, it may be that you are looking along the wrong tunnel altogether. If you’d like an informal discussion in confidence about your situation then we are on hand to chat.

Rob Russell, Senior Manager, ReSolve

Rob can be contacted on rob.russell@resolvegroupuk.com

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