NSTie your bets: How long do you think the government will be in the business of running a retail energy supplier? In other words, is the “special management” of light bulb energy likely to be a quick solution or a long distance?
Business secretary Kwasi Quarten cautioned against answering that question at this week’s Commons. “The house needs to understand that it doesn’t want this company to be in this temporary state for longer than absolutely necessary,” he said, as to how to think of a rational schedule. Did not provide hints for.
6 months? This is covered by a government prepayment of £ 1.7 billion of public funds used by managers (consultant firm Teneo) as working capital to ensure that Bulb’s 1.7 million customers receive gas and electricity. It is a period to be done. But, of course, if it turns out that reversing the business is harder than expected, a second step is always possible.
Senior executives in one industry say complexity is certainly a way to bet. An important point in the “special management” process, he says, is that Ofgem has abandoned the element of control. All 23 other company failures are handled under the “last resort supplier” (SoLR) system, and regulators can force customer transfers as needed. Under control, the company is not obliged to accept customers. It’s also less urgent because the government is backing the light bulbs. It will continue to operate and will continue to be supplied to customers.
Then there is the fact that Ofgem itself doesn’t have a clear plan, or at least it doesn’t seem to have a plan to advertise. A letter from CEO Jonathan Blairy to Quarten demanding the management of valves provided three arguments in favor. No one suggested a quick solution.
First, there was the fact that “the industrial system is already under considerable burden” because it manages the transfer of customers of bankrupt SMEs. It is unlikely that the burden will be eased immediately. Two other companies failed on Thursday.
Second, Ofgem was worried about competition issues if a major supplier was given to Bulb’s customers as a lot of work. The administration “will provide time to consider these issues,” Blairy wrote.
His third point was that the use of Solr “is likely to cause industry tax claims that will be passed to the market in the next regulatory year.” This levy allows new suppliers to recover the costs they supply to new customers and adds them to all household invoices. According to analysts, at current wholesale prices, a light bulb premium could mean £ 90 in banknotes if acquired in a single hit. The executive branch allows “timing discretion,” Blairy wrote.
I understand. A quick auction of light bulbs is clearly possible, and Sky reported this week that the city company Lazard will be hired for that purpose. However, given the significant interaction between Ofgem’s price caps, wholesale prices, and levies, 1.7 million account holders want a cast iron guarantee that they won’t lose money in a transaction. You have to assume. Temporary nationalization is easy. Exits can be difficult.
Despite the resilience of Mitchells & Butlers, cost inflation may be the 2022 story for hospitality
With 1,600 pubs under brands such as Harvester, All Bar One and Nicholsons, Mitchell’s & Butlers is clearly one of the survivors of the industry. Indeed, last year’s pre-tax loss was £ 42m, but CEO Phil Urban sounded mildly cheerful. Trade is now above pre-pandemic levels, Panther has booked Christmas parties, and at the operating level, M & B has recorded a profit of £ 81m.
However, we need to focus on the fact that Urban warns of cost inflation in parallel. The hospitality industry as a whole is likely to be in 2022. Excluding the inevitably soaring energy prices, M & B has set food and beverage price inflation at 7% and expects labor costs to rise 6.6%. When the national living wage goes up in April next year. Only property costs provide relief.
In a normal year, the company expects overall cost-based inflation to increase by 3.5%. This time around at 6%, the Bank of England is probably a noteworthy number. That means price increases are on track, even before VAT returns to pre-Covid levels of 20% in April next year for large pub operators.
Again, M & B is a good way to overcome what are called the “major challenges” of cost. But the big picture is that the number of UK licensed facilities has dropped by 8.6% since the start of the pandemic in March 2020. The worst may be over, but life in a pub game is not easy.
Uncertainty about whether the government has been engaged in light bulb energy for a long time | Nils Prattley
Source link Uncertainty about whether the government has been engaged in light bulb energy for a long time | Nils Prattley