People
The UK’s energy crisis is playing out across the media, with a number of medium- and small-scale suppliers facing significant distress after a 250%+ rise in wholesale gas prices since the start of the year. The knock-on effects are now also becoming increasingly clear for retailers.
Already beleaguered by the disruption to supply chains from labour shortages and the global shipping crisis, this accelerated turn of events in the energy industry will put further pressure on availability of goods critical to boosting businesses’ chances of strong seasonal performance as we head towards the Christmas period.
At a consumer level, concern will turn to depleted levels of income available for discretionary spend across all retail categories this winter, should a switch to more expensive energy tariffs be enforced as a result of distressed suppliers failing and exiting the market, unable to secure additional backing or acquisition by larger players. Nearly 1.5 million customers have been affected already, and this will only increase as more suppliers collapse.
While the prospect of deciding simply whether to “heat or eat” can hopefully be avoided across UK households, customer choice regarding the latter is sure to be constrained, as food retailers desperately scramble to secure meat produce and frozen goods from their supplier base.
Could Christmas excess be curtailed by CO2?
The season of traditional excess and over-consumption, particularly from a grocery perspective, could be curtailed as CO2 supplies – a vital component in food transportation and packaging – remain depleted in the UK due to reduced supply from Russia and a spike in demand for Liquified Natural Gas in Asia driving prices up. UK-based fertiliser factories, who are major producers of CO2 as a by-product, are to be supported by the government to keep production running after they ceased operations due to the sky-rocketing wholesale gas prices, but this is only temporary.
The impact is far-reaching on supermarket shelves. Many fresh/chilled foods and baked products rely heavily on this particular gas in packaging processes to prolong shelf life. As an essential ingredient for carbonated drinks, the potential impact to hospitality operators is also pronounced.
The harsh winter of 2020/21 in Europe during the pandemic had already put the region’s energy industry on an unsure footing. Now, as COVID-related support measures start to rescind for businesses, the UK Government is taking a tough stance in refusing to bail out the energy suppliers who are on the cusp of collapse, preferring to underwrite the debt incurred by larger suppliers who take on the customers who are thrown into limbo by this perfect storm.
While it may be too soon to talk of large-scale restrictions to energy supplies for businesses during the winter period, the almost universal reliance on this commodity means further agility, innovation and meticulous supply chain management are a must for retailers who are now ramping up for another holiday season of great uncertainty.
