We are pleased to see that Liz Truss has been reading our recent commentary about the dire state of household and business finances due to the energy crisis and has decided to cap energy prices for both domestic and business customers.
This is great news for us all although the domestic cap at £2,500 will still be, for many, unaffordable given that it remains far higher than before the energy crisis. Also, having been scared by the tales of energy price Armageddon, many households will have decided to take a fixed rate for their energy which, although higher than the standard charge at the time, would have given peace of mind and the ability to budget their household finances. It is inevitable that many people will now be locked in to a fixed rate that is higher than the £2,500 cap and whilst it would appear that energy companies will be required to discount those fixed tariffs, it does appear that some households will still end up paying more so will be left regretting their choice of financial prudence.
Time will tell, but we feel it extremely unlikely that energy companies will allow customers to exit those fixed price contracts without any break penalty – the defence being that the energy company hedged that fixed contract at the time and so would lose money if they reversed that contract. We can see the argument but we all know the reality is that any ‘loss’ on the part of the supplier would lead to a miniscule reduction in the current record profits being reported.
Looking at the support for businesses, there can be no doubt that this may well save many businesses in the short term but the current business support package is for just six months, with then more targeted support for specific sectors such as hospitality. This initial support is welcomed and should enable many businesses to trade through the winter which will be great for those businesses that depend on the winter/Christmas trade but is by no means the lifeline businesses require right now.
If businesses fall outside of the post six month support then what lies ahead for them? We fear that this may just mean a delay before many businesses fail as we do not believe energy price inflation will disappear in the next six months.
We have long argued that our hospitality sector is in crisis and so we welcome this lifeline along with the promise of further support after six months although, with the devil being in the detail, we need to wait until that detail is provided, to see if it will be sufficient.
Our view is that this latest news is positive but we remain worried for both households and businesses. Part of our reason for this worry is that the Bank of England are cautioning that inflation will remain a major issue and they are not ruling out further rate hikes.
If you are involved with, or know of any business that is struggling financially we urge you to talk to us. We urge every business owner/director that is worried to act decisively and seek independent professional advice before it is too late and that is why we are always available for an initial zero cost assessment which can be arranged by contacting Alistair Dickson.
The directors of SKSi look at a formal insolvency process as the last resort – not the first. It is their long-held belief – borne out with proven experience – that seeking advice at the first sign of financial pressures will lead to a more favourable outcome.