UK electricity firms went bust in record numbers in 2019
6th April 2020 | Residential Energy
Last year saw more energy firms go bust in the UK than ever before as the market feels the squeeze from regulatory pressures and tight margins. According to accountancy firm Price Bailey, 24 energy firms folded in 2019 including Economy Energy, Extra Energy, Spark Energy and Toto Energy.
A confluence of factors is thought to be behind the failures. The Government has set an energy price cap that has been chipping away at profits and it also mandates that firms pay an annual renewable power fee if they do not source enough of their energy from green sources. In addition, wholesale prices increased in 2018to record levels. However, these sank considerably in 2019 and many firms did not pass their savings onto consumers which should help to shore up finances to some degree after a difficult year.
In December, energy provider iSupply was forced to pay £1.5mafter it was discovered that the company had overcharged thousands of customers for their energy and kept this information from regulator Ofgem. In 2018 17 companies were forced to shut and in 2017 it was just five, the data shows.
Paul Pittman, a partner at Price Bailey, said, “There has been a lot of focus on the retail end of the supply chain but whenever an energy retailer goes bust there is a knock-on effect down the supply chain. “The number of retail energy suppliers going bust is just the tip of the iceberg. Businesses engaged in the trade of electricity, which are creditors to retail energy suppliers, are going to the wall in record numbers. We are seeing a domino effect. Every time a small energy retailer goes bust, that increases the financial strain on the rest of the supply chain, making those businesses more vulnerable to collapse.”
The energy sector has been going through significant infrastructure changes in recent years with more and more coal plants coming offline as focus shifts to less carbon-intensive fossil fuels like natural gas and renewables.
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