Watch­dog ide­ol­ogy risks leav­ing us out in the cold

The Sunday Telegraph - Money & Business - - Business - Ben Mar­low

An­other one bites the dust. Ofgem is fond of trum­pet­ing just how com­pet­i­tive the en­ergy mar­ket is to­day. This, the reg­u­la­tor claims, is proof that its at­tempts to smash the dom­i­nance of the Big Six providers is work­ing a treat. One slight prob­lem though: many of the new en­trants seemed des­tined to fail.

Last week, it was the turn of Yu Group, an­other frag­ile young tid­dler. Un­less you live in the Not­ting­ham area, where the gas and elec­tric­ity sup­plier is based, or are among its hun­dreds of busi­ness cus­tomers, you prob­a­bly will not have heard of the sup­plier.

Still, if the com­pany isn’t a house­hold name, its predica­ment is be­com­ing wor­ry­ingly fa­mil­iar. For years, the gov­ern­ment has been des­per­ately try­ing to in­tro­duce more com­pe­ti­tion into the re­tail en­ergy mar­ket. On the face of it, the plan is work­ing – by the sum­mer of 2017, more than 60 new sup­pli­ers had been set up, many of­fer­ing cut-price deals to cus­tomers. What’s more the mar­ket share of British Gas, E.ON, Npower, EDF, Scot­tish Power and SSE, who pre­vi­ously had an iron grip on the en­tire mar­ket, had been eroded to around 80pc – mu­sic to min­is­ters’ ears.

Yet, many of the chal­lenger sup­pli­ers have proven sim­ply too weak to stand on their own two feet. Last week, Yu Group im­ploded spec­tac­u­larly, is­su­ing a profit warn­ing that wiped 80pc off its shares in one day. Its prob­lems have all the hall­marks of a com­pany that, in its des­per­a­tion to crack a fiercely-com­pet­i­tive mar­ket, has grown too quickly and ag­gres­sively. The com­pany said it had found sev­eral ar­eas of “sig­nif­i­cant con­cern”, in­clud­ing prob­lems in how it recog­nises his­toric ac­crued in­come. It was also forced to take a big write-down on un­paid bills and was whacked by “tough mar­ket con­di­tions”. It prob­a­bly doesn’t help that the com­pany was run by Bobby Kalar, an en­tre­pre­neur with no prior ex­pe­ri­ence in the en­ergy in­dus­try.

It is the lat­est in a string of min­nows to run aground. Iresa was barred from tak­ing on new house­holds be­cause of cus­tomer ser­vice fail­ings and Fu­ture En­ergy and GB En­ergy col­lapsed.

Ear­lier this year, a damn­ing re­port laid bare just how frag­ile the smaller end of the mar­ket was.

Al­most half of Bri­tain’s 81 en­ergy sup­pli­ers are at risk, it said. Eight were iden­ti­fied as be­ing on the brink. An­other 30 had been left fi­nan­cially un­sta­ble by the price hikes trig­gered by the Beast from the East.

Many hun­dreds of thou­sands more bill pay­ers face the risk of sud­den en­ergy tar­iff hikes be­cause al­most 40 sup­pli­ers may be forced to squeeze their cus­tomers to sur­vive.

The prob­lem is that, in its ef­fort to crack the Big Six’s stran­gle­hold, Ofgem has al­lowed too many fi­nan­cially-weak sup­pli­ers into the mar­ket. Com­pe­ti­tion is im­por­tant but not if it puts cus­tomers at risk. Mean­while, Yu pre­dicted it would not re­turn to prof­itabil­ity un­til the end of 2019, and even then warned that its mar­gins would miss fore­casts.

So far, the prob­lems have been con­fined to a smat­ter­ing of min­nows but the reg­u­la­tor needs to act quickly and toughen up its checks. An­other harsh win­ter beck­ons.

Many new sup­pli­ers have proven too weak to stand on their own two feet

Ryanair beats TSB to hit new low

TSB’S dis­as­trous han­dling of its gi­ant IT melt­down was a new low for pub­lic re­la­tions, so con­grat­u­la­tions to Ryanair for cook­ing up a gaffe of sim­i­lar pro­por­tions last week. Its re­sponse to a film­ing of a pas­sen­ger racially abus­ing an el­derly black woman was em­bar­rass­ing in the ex­treme.

“RYANAIR STATE­MENT ON RACIST VIDEO”, screamed the press re­lease when it fi­nally came. Not a good start. The video wasn’t racist, it was the be­hav­iour of the pas­sen­ger that was racist.

It then went on to re­veal that the video had sur­faced “late on Sat Oct 20”. So it took nearly a week to re­spond pub­licly to this shock­ing in­ci­dent. Then the air­line went on the say that the clip was shown to cabin crew af­ter land­ing on Oct 19. Make your mind up – which day did it sur­face – 19 or 20? Next, it claimed to have “im­me­di­ately re­ported” it to Es­sex Po­lice on Sun Oct 21. That’s an in­ter­est­ing in­ter­pre­ta­tion of the word “im­me­di­ate”.

But the most re­veal­ing de­tail was the ad­mis­sion that the video was re­ported “when it gained wide­spread cov­er­age on so­cial me­dia”. So, not only did it take two days for Ryanair to act, but it only did so once the world knew about it.

This may seem rather mealy-mouthed, but re­mem­ber boss Michael O’leary isn’t usu­ally so shy in speak­ing out. “You’re not get­ting a re­fund so f *** off,” is just one of his many charm­ing re­torts to cus­tomers. Af­ter a sum­mer of dis­con­tent with re­bel­lious Ryanair pi­lots, per­haps the usu­ally pug­na­cious Ir­ish­man has gone soft.

Su­perdry come­back floun­der­ing

I can’t be the only one who has never quite un­der­stood how Su­perdry be­came a high street phe­nom­e­non.

Still, what­ever your opin­ion of its clothes, founder Ju­lian Dunker­ton has un­doubt­edly cre­ated one of the most suc­cess­ful British brands of mod­ern times. With a le­gion of fa­mous fans, in­clud­ing David Beck­ham, Leonardo Dicaprio and Idris Elba, it now has more than 500 stores glob­ally and was worth £1.7bn at the start of the year. Not bad for some­one who left school with three E grades at A-level.

So why, de­spite a se­ries of profit warn­ings, is he strug­gling to persuade share­hold­ers to back his cam­paign to be re­in­stalled as chief ex­ec­u­tive? Sim­ple – great en­trepreneurs don’t al­ways make good bosses. And hav­ing had one stab at it al­ready, Dunker­ton’s plan to re­vive the firm’s for­tunes all sounds a bit passe. Not un­like a Su­perdry T-shirt.

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