Retailers and representatives from the UK energy industry are preparing for crisis talks later this month as fears grow over looming price rises.
Retail Week understands the British Retail Consortium is bringing together retail bosses and Energy UK – the membership body for the energy sector – amid growing concerns over retailers’ ability to keep stores running.
Retailers of all sizes – particularly supermarket operators – are concerned that spiralling utility prices could soon reach a crisis point. Some even fear a scenario in which the government is forced to ration energy, or even adopt rolling blackouts, in worse-case scenarios being explored by Whitehall.
Just last month, Iceland boss Richard Walker said surging energy costs would hit the frozen food specialist’s profitability – and had already forced the business to halt all planned new store openings.
Walker said Iceland’s energy bills have doubled to £20m and the grocer was “fighting to keep the lights on”.
A source at another national grocer said while hedging would cushion the business from an immediate blow, its refrigeration costs were set to jump 50%. The source said energy price rises were disproportionately affecting the food industry.
“If you look at it from the supermarkets’ perspective, it’s not just energy that’s rising. Commodity prices have gone up as well with things like CO². There’s almost a double whammy on supermarkets because there are your own costs, but then there are the suppliers’ costs as well,” they added.
An industry source said invitations have already been sent by the BRC for the September 21 summit. They described the forum as “a working session, featuring a panel of experts who retailers can then put questions directly to about the market”.
The event will be held over Microsoft Teams and is open to all BRC members. Alongside representatives from Energy UK, the BRC has also invited Cornwall Insight – a consultancy firm that specialises in the energy sector.
The BRC has started circulating a survey to its members to get a better idea of the impact that surging energy costs are placing on the sector, such as whether it is affecting strategic investments or is directly feeding into price increases for consumers.
While the energy forum will not lead to a submission to the government, the source said BRC members are united behind lobbying Westminster to freeze business rates in the short term.
Currently, the next set of business rate rises will be linked to this month’s consumer price inflation figure, which is almost certain to exceed the 8.8% number for July published in August.
“A decision to freeze business rates next year would have a positive impact on retailers today,” the source said. “Retailers are making decisions on next year’s budgets now and knowing they wouldn’t have to pay business rates based on surging inflation would be a huge help.”
Grocers fear winter blackouts
The summit comes as grocers become increasingly concerned about the prospect of blackouts in the winter, which would play havoc with supply chains and refrigeration and freezers in stores.
While prime minister Liz Truss ruled out blackouts during her leadership campaign, Whitehall has reportedly been wargaming a “reasonable worst-case scenario” for an energy crisis over the winter.
A source at one big-four grocer said the prospect of energy rationing or even blackouts lasting days was a real concern. They said: “The conversations at the moment are what happens in the fourth quarter if the government turns around and says that we need to ration energy supplies to certain industries?
“You’d expect that food retail will be prioritised in the same way that it was during Covid and classed as essential but within that, there could still be situations where we could only operate at certain times. If that’s the case, then we really need clarity and we need it soon.”
Downing Street has reportedly drawn up plans for a situation in which a cold weather snap, combined with low levels of energy imports from Norway, would see the UK face an electricity shortfall of up to a sixth of peak demand.
Despite this, Number 10 insisted “households, businesses and industry can be confident they will get the electricity and gas they need”.
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