It’s only just February but, amidst intense disruption, 2019 looks set to be a year in which the energy supplier sector could change for good.
Yesterday’s news that npower was to lose some 900 jobs over the coming year was perhaps a surprise, but not necessarily unexpected. The supplier, owned by German energy giant innogy, may well be an established member of the Big Six, but it’s had something of a torrid time of late.
For the best part of 14 months npower was, for all intents and purposes, to be bundled with SSE’s rival supply division in a move that would create a UK-headquartered supply firm larger than all but British Gas. A team was in place, led by ex-Dixons Carphone boss Katie Bickerstaffe, and a “completely new model” of business was being teased.
But the transaction soured. The finer details of Ofgem’s price cap moved the goalposts and SSE were no longer willing to play ball. Claiming the change in circumstance would mean the new entity would no longer be in a position to meet trading collateral requirements in a sustainable way, SSE went in search of another team to join.
And, now, npower are in a position where a year-long cost reduction programme is being launched and by the supplier’s own admission, it won’t go far enough. Paul Coffey, chief executive at npower, said that the firm is still forecasting “significant losses” for the year.
In truth, npower is not the only energy supplier to suffer at the hands of significant competition and a difficult trading environment. EDF are rumoured to be investigating a potential exit from the UK retail market and last year was also difficult for British Gas owner Centrica. As many as 4,000 jobs and 370,000 customers were lost, and the firm’s preliminary results later this month should shed more light on how the country’s largest energy retailer is faring.
Of course it’s not just the major players that are struggling. Ten independent suppliers have ceased trading in recent months and Ofgem’s Supplier of Last Resort function is quickly becoming one of the regulator’s most prolific. Almost all of those to have gone bust have pointed towards a harsh business climate.
And even those that are doing well aren’t necessarily doing all that well. In December Bulb reported a meteoric rise in customer numbers – more than 870,000 now purchase their energy from the Shoreditch-based firm – as revenue soared to £183 million. But losses for the year rose in tandem, spiralling to £23.7 million as the added cost of operating as an energy supplier at that scale, with ECO and Warm Home Discount obligations mounting, hit home.
It was a similar tale this week for Octopus Energy, which filed its results for the year indicating a near quadrupling of revenues to £129 million but only a marginal decrease in its losses to £5.3 million.
There aren’t many industries where a company can quadruple its top line and only record a 15% improve in its bottom line, and conclude that to be a year worth shouting about.
But that would appear to be part and parcel of the UK energy retail market as it stands and if you think that’s a tough environment, then there’s every indication that the coming years could be tougher still. The price cap is to remain in place for the time being and wholesale market volatility shows little sign of abating.
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