Russia’s invasion of Ukraine will make drivers across the UK feel the pain of further fuel price increases first.
Oil prices are pushed above $100 (£74.3) a barrel – a development that has not been seen in the last eight years.
Reports have previously predicted that tension between Russia and Ukraine could force many more energy suppliers in the UK to go under.
AA President Edmund King said: “Russia’s attack on Ukraine and resulting geopolitical uncertainty has pushed Brent crude above $100 (£74.3) per barrel for the first time since 2014.
“This will result in hikes in prices at the pumps. New record fuel prices are likely any time soon.”
While all diplomats’ eyes are on the Russia-Ukraine crisis, reports suggest that a further escalation could force many more energy suppliers in the UK to go under.
Ofgem have commenced preparations for ‘more supplier failures‘ had started following the ongoing crisis between the two countries, according to The Telegraph.
More than half of the UK’s remaining domestic electricity and gas suppliers face an “imminent risk of collapse”.
That is the worrying finding of a report by London based accountants and business advisors Price Bailey which suggests those companies at risk are “technically insolvent”.
The business advisers said that excluding the so-called Big Six and two businesses with “suppressed risk scores”, of the 22 remaining suppliers, 12 have negative assets on their balance sheets.
That means that energy businesses are likely to go bust, being unable to make payments to lenders and suppliers.
The analysis also found that of these 12 suppliers, ten have a Delphi Risk score of “above average” or “higher” and six are in the “maximum risk” category.
Price Bailey said businesses deemed “maximum risk” find it difficult to access funding without personal guarantees from directors.
The report said these companies are also “highly likely to be subject to winding up petitions or intention to dissolve notices in the next 12 months”.
Matt Howard, Partner at Price Bailey said the energy retail market faces a domino effect from closures of businesses “Every time a small energy retailer goes bust, that increases the financial strain on the rest of the ecosystem, making those businesses more vulnerable to collapse.
“Customers are passed on to surviving suppliers but exposure to those customers won’t have been hedged, meaning very often they are being taken on at a loss. It is possible that only one or two of the challenger brands will be left standing alongside the ‘Big Six’ this time next year.”
The invasion of Ukraine by Russian forces could cause the UK gas price to soar to as much as 1,000 pence per therm, it’s been predicted. Worst case scenarios include rolling blackouts and
That would be more than double its highest level recorded in December, just over 450 pence per therm. We are currently seeing supplier price books being pulled after only hours of availability.
Those suppliers still taking new business today are limiting contracts to 12 months only to minimise their exposure to price increases.
Ofgem’s Chief Executive Officer Jonathan Brearley has previously shared his concern about a further rise in energy prices in the event of a the crisis deepening.
In the past few days, two more small energy firms, Whoop Energy and Xcel Power Ltd announced their departure from the market.
The recent domino of corporate failures is blamed on rising energy prices, the impact of which saw a huge increase in the price cap level starting in April. It is rapidly becoming untenable to be a domestic supplier, the business model doesn’t stack up now.
What’s my advice I hear you ask?
If you are out of contract you will be paying frankly obscene charges right now. Whether it’s just 12 months or 24 months, it’s still going to be a better proposition than remaining on any variable tariff.
As usual, the media will concentrate on domestic customers and the unprecedented rises in the price cap rates. As commercial specialists we are much more concerned for our business customers, some of whom have already endured 70 and 80% price rises of contract rates from 2 or three years ago.
This is again going to hit high users such as manufacturing and hospitality the hardest, just at a time when recovery looked like something possible.
Make as many energy savings as you can.
If it’s not now, when your energy costs double, it may well become your biggest business expense for many small businesses. Before borrowing gets more expensive, invest in more efficient boilers, renewables such as solar and battery storage.
Going green and getting away from fossil fuels will rapidly become a necessity, not just a desirable option.
If you need any help or advice about your business energy please get in touch for a no-obligation chat. – Andy 07929 625984