Watchdog ideology risks leaving us out in the cold
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.