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UK Business Energy Market Outlook 2021

Posted 11 February 2021 | Feed Icon | 0 Comments

It is widely accepted that the COVID-19 global pandemic has fundamentally changed how the business world operates. Most businesses have been forced to adapt and for many, their workplaces were empty for much of 2020 as their staff worked from home. Consequently, business managers were less focused on their company’s gas and electricity needs. However, as we start to see the green shoots of positive change, it is now time for businesses to reconsider their energy procurement needs.

Business confidence builds, energy markets rally

Thanks to the rapid roll out of COVID-19 vaccines across the UK and the government starts to plan for the relaxation of lockdown, business leaders are considering how to adapt to the impact of changing business practices over the last twelve months.

Energy markets have rallied over recent weeks, reflecting increasing global fuel demand. Economists are predicting a rapid pick up in economic activity around the world as we move further into 2021 and this is likely to lead to energy prices continuing their climb.

In early December, the news of successful COVID-19 vaccine trials triggered a boost in confidence in oil markets which led to a surge in fuel and energy prices. Between start December to mid-January, Brent Crude Futures – a key driver for UK wholesale energy prices - have seen oil prices climbing by over 15%. On the back of these increases and recent colder weather, gas and electricity prices have soared by 24.72% and 17.06% respectively. To keep these increases in context; prices are still between 30% (electricity) and 13% (gas) cheaper than prices were in Autumn 2018.

As you consider your own business’s re-opening plan, it’s important to re-evaluate your energy procurement.

Does your pre-lockdown business energy contract still apply to your new way of working?

As part of your recovery plan, this is a good time to consider switching energy suppliers as your business needs shift into a new gear.

Given the key focus for businesses returning to the office being the safety of staff, it’s understandable that optimising utility contracts is perceived as being less critical. However, given the current strain on company cashflow, it is worth noting that there are savings to be had by doing your research now.

BSA Buying Group’s energy procurement experts can help cut energy costs

This is where BSA Buying Group can help. Over the last 15 years we’ve helped UK businesses of all sizes and sectors minimise their energy costs (and 25 other cost categories) and we’re confident that we can secure the best business gas and electricity prices for your business.

Our energy procurement specialists remove the hassle, are completely independent of the energy markets and are ready to find a tailored package that suits your long-term energy requirements.

Free energy cost forecasting dashboard

For a limited time only, BSA Buying Group offers its energy clients with one year’s free access to a utility management dashboard, presenting a regularly updated forecast of your energy costs for the next three years. It provides alerts at specific points in the financial year in line with your company budgets so you can take advantage of cost savings and reduce the risk of future energy price rises.

We know how important it is to free up cash in these challenging times, and BSA Buying Group can optimise your energy costs. Contact us today for a no-obligation discussion on 0800 254 0344.

by Matt Roper | 11 February 2021

UK Economic Outlook (2017) & its impact on Sterling

Posted 26 July 2017 | Feed Icon | 0 Comments

Now that the UK’s GDP estimated growth figures for the first half of 2017 have been published, it is apparent that we’re experiencing an economic slowdown in 2017 versus 2016. Official figures from the Office for National Statistics estimate that the UK economy grew 0.3% in April to June 17, slightly up on the 0.2% growth seen in quarter one. This shows that the perhaps surprisingly strong economic growth witnessed immediately after the Brexit referendum has faltered significantly – the UK and Germany were the fastest growing economies in the G7 last year, but now we’re in the slow lane. Year-on-year growth has slowed from 2 percent to 1.7 percent. The International Monetary Fund (IMF) has recently revised downwards UK GDP growth for 2017 from 2.0 percent to 1.7 percent.

So why the slowdown? Well against the obvious back-drop of political and economic uncertainty caused by Brexit, and most recently, the unexpected failure of the Conservatives to secure an overall majority at the general election, it is widely predicted that the UK economy will experience less growth than would have otherwise been the case.

But we can add another dampening factor too, caused in part by Brexit – namely the recent uptick in inflation which has not been reflected in wage inflation, thereby hurting consumer spending. And weaker sterling against the major currencies since the Brexit vote has also caused import price inflation. Most economic commentators also remain concerned about the UK’s productivity gap versus the other major economies, with relatively weak investment in infrastructure and skills training. This is keeping a lid on wage inflation, as is the government’s resistance to growing calls to scrap the 1 percent public sector wage cap.

Most of the growth is coming from the services sector, which grew 0.5 percent in the last quarter (up from 0.1 percent in quarter one). But construction and manufacturing have contracted by 0.9 percent and 0.5 percent respectively.

With three quarters of the UK economy coming from household consumption, the slightly increased inflationary pressures rising faster than wages is dampening the growth forecast. This in turn will have a negative impact on businesses, many of whom are already dealing with a squeeze on margin, particularly if exposed to import prices, due to the ongoing weakness of sterling.

Expect the same in the second half of 2017

Growth in domestic consumption will only happen if businesses feel confident enough to increase wages. But it is difficult to see where this confidence will come from, given the dampening factors highlighted above – the weak pound, higher import prices, low investment in skills training, increased inflation and above all the continued lack of any certainty on how Brexit will be negotiated. Expect the UK to continue to under-perform against its major economic competitors.

How is sterling faring on the international trading markets?

The Bank of England Monetary Policy Committee (MPC) has recently voted yet again to keep interest rates at their historic low point. But the markets were taken by surprise by the fact that more members of the MPC voted for an interest rate rise than expected. Some commentators think that a rate rise may be on the cards in 2017 and this has slightly strengthened sterling in the last few days (as a rate rise would likely result in a surge in global investment funds, thereby increasing the value of sterling relative to other currencies). That said, most commentators expect the current weak position of sterling to remain stable over the next few months with nothing on the horizon expected to create a buying surge of sterling. Despite Article 50 being triggered four months ago, the markets still don’t see clarity surrounding the UK’s negotiating position and the threat of a no-deal remains. Until the market feels more certain (and positive) about the outcome of Brexit, and with the economy looking sluggish, it remains likely that sterling will mirror the weak economic position and remain weak for the remainder of 2017 and early 2018.

The only factors which may help to boost sterling, but perhaps not by a significant margin, might be external global events, such as a political shock in the US or EU caused by President Trump being impeached, say, or Merkel losing the German elections in September. Neither looks likely, but given the political turmoil experienced in the last couple of years, all bets are off. And that’s without considering China, North Korea….

How can my company protect itself against damaging foreign exchange movements?

With sterling remaining weak, increasing number of UK based companies are having to face increased import prices and reduced values of repatriated overseas revenues. This increased financial risk which needs to be mitigated. I cover some aspects of this in my previous blog relating to how procurement functions should react to the increased risks resulting from Brexit, in particular managing EU based suppliers. In terms of currency swings, a key start point is to understand not just what level of price needs to be obtained for a given product or service sale to be profitable, but also how this price level is impacted upon by currency fluctuations. Then evaluate the degree of risk the business is prepared to take in hedging that risk away, such as buying forward versus spot buying currency for example. This is where external currency specialists can help.

Which is where Buying Support Agency can now assist…

Given the currency market uncertainty, Buying Support Agency is delighted to announce the launch of two value for money services within the ‘Professional Services’ section of its BSA Buying Group.

The first is our sourcing of a multiple-award winning foreign exchange broker, meaning that members of BSA Buying Group can enjoy heavily discounted exchange rate charges, reduced still further thanks to BSA Buying Group’s buying power that could save your company money compared to your bank, with no hidden fees or charges.

Secondly, our BSA Buying Group members can now benefit from our partnership with the UK’s number one source of part-time Finance Directors. This makes it possible and practical for SME businesses to take on one of the UK’s leading Finance Directors on a part-time basis for a fraction of the cost of employing a full-time FD. These experts are well versed in successfully steering companies through volatile trading conditions, in securing funding and so forth.

For more information on either of these services, to find out how to join BSA Buying Group to access up to 24 areas of overhead cost, or to seek support in preparing your supply and procurement functions for the post-Brexit world, call 0800 254 0344 today.

Author: Matt Roper

(CEO, Buying Support Agency Ltd)

by M Roper | 26 July 2017