Fossil fuels: the unforgivable price
1. The Gulf Oil Fires
2. The Gulf Of Mexico Oil Spill
3. The Exxon Valdez Oil Spill
4. Amoco Cadiz Oil Spill
5. Ixtoc Oil Spill
To find out why, the report is well worth a read.
Ofgem hires the BDO - are our worst suspicions confirmed?
Image by by Images_of_Money via flickr
BDO no! Surely not?
Well it’s getting serious now.
Ofgem have announced that they’ve appointed ‘forensic’ accountants BDO to pour over the segmented accounts of the Big 6 energy suppliers...we’ve blogged about the segmented accounts already in 'Are energy suppliers making too much money?')
Well, it seems something within those accounts has aroused the suspicions of Ofgem, and not just the revelation of the significant profits made from supplying business energy....we’ve blogged about the regulator too in 'Ofgem: the return of the fat cat?'
So why blog again?
Well, things are getting VERY interesting.
For a start, the segmented accounts for 2009 and 2010 (the first to be published) are being ‘forensically’ reviewed in order to “give recommendations on how best to improve accounting disclosures by energy suppliers”. That sounds like they are trying to tell us something.
Ofgem believe that the 2009 accounts contained some £800m of profits that were not ‘clearly’ attributed to supply or generation activities (instead they were mostly being listed as exceptional items).
For 2010, Ofgem has already pushed for an improved format of disclosure, which it was acknowledged that the Big 6 had delivered.
But it appears something is still buzzing in someone's bonnet, and it’s getting personal. We’ve recently had the furore over Lord Mogg’s salary at Ofgem and now the heads of the Big 6 are in the firing line...with a claimed £10m of collective earnings being quoted for the last year.
The thing is, when you start to see salaries being used as political capital you know there is trouble ahead.... just think Gerald Corbett of Railtrack or Cedric Brown of the old British Gas.
So what happened after the last forensic analysis of a political hot potato?
Well, we had National Rail, continued failure of the rail network, a huge bill to ‘get it back on track’ and we’re still paying for it today with an 8% rise in fares from January. At least Cedric Brown got off lightly, after all I can think of worse indignities than having a 30 stone pig named after the chief pantomime ‘villain’.
But ultimately the backdrop to all of this, Ofgem included, is one of uncertain energy markets. The dominant energy suppliers are going to come under ever greater social and political pressure to soak up more of the cost of energy price volatility. On top of that we are moving into a railtrack/network rail scenario where we have untold sums of money required to overhaul the energy networks and make them fit for purpose (let alone find some way of replacing all those nasty fossil fuels that Mr Huhne so despises).
So political pressure, social pressure, a need for huge investment and an angry media on one side and a set of commercially minded businesses on the other.
Undoubtedly the pressure will be focused on the domestic arms of the energy suppliers and the disclosure of and impact on householders will be the clear priority (and vote winner). After all, the residential sector has a very strong pressure group in the form of the British media, whereas the business community doesn’t. There is a much greater subtlety to the influence commercial enterprise can have than a screaming Daily Mail headline.
So one sadly predictable scenario is that business energy prices end up subsidising residential energy and taking the lions share of new investment costs, not to mention having to carry the burden of green taxes.
So no hope then? Well no, you can vote with your feet and make sure that even with the backdrop of rising prices and a future of uncertainty there will always be a best deal out there... it’s good to be in control.
There’s radical and there’s radical and this is radical but is it workable?
We’ve spoken recently about the significant profits business energy suppliers are making and we’ve made our point very clear that ultimately if as a business you don’t shop around to get yourself the best deal then you’ve only got yourself to blame. Of course uSwitchforBusiness make it so you don’t even need to spend your own time doing it but that’s not for this conversation...
What I want to talk about is the Shadow Energy Secretary Meg Hillier.
Now we all know that Opposition politics is a carefree, mostly risk-free world, given that nothing you say or do ever really matters...let’s call it the Lib Dem phenomenon. (fair play that they’ve made it into the coalition but do any of us know what they collectively stand for?!)
Anyhow I digress, the reason for this blog is the radical thoughts emanating from Her Majesty’s Opposition about energy supply in the UK.
By way of a bit of background.... the 'Big 6' energy companies are vertically integrated businesses. In that I mean that they generate their own electricity as well as selling it to the likes of us. Ofgem, the regulator, has been under considerable pressure to act on the alleged misbehaviour of the big 6. One action that has already been invoked and has added new transparency to the market is the obligation on the Big 6 energy suppliers to report their profits in segmented accounts... it’s that data that has allowed us to see that from business energy supply alone some £750m of profits flowed to 5 of the Big 6 last year. Nice.
But Ofgem has been pressed to do more, and as they are supposed to enable competition and fairness or in 21st Century corporate speak ‘promoting choice and value for all gas and electricity customers’. (I wonder how many people, hours, days, pounds and frothy cappuccinos it cost to come up with that?) It is unsurprising that there is a political move to come up with a more tangible solution than publishing a couple of pages of accounts.
Ofgem’s idea is to enhance competition by forcing the Big 6 to auction up to 20% of the power they generate. The idea is that independent suppliers (whether existing or new) can buy this power and then sell it on to their customers potentially at lower prices than the Big 6 can. That should raise the temperature of a few boardrooms around the country...literally in fact.
But Meg Hillier, wants to ‘compel’ the the Big 6 to auction ALL of their electricity. She has said “We’re saying: ‘Let’s look at that. Opening it all up may be the way to boost competition and allow new providers in”.
Hmmmm, now politicians are not always logical, considerate, honest, representative or frankly sane... but to any imagination the literal extension of this policy is that the Big 6 will just be generators and not suppliers. Why would they hold onto the element of their business that makes them relatively low margin and whose competitiveness will be undercut by government supported new entrants?
We then have a big gap. Who’s supplying the power? Yes, the networks will continue to run and electricity will continue to flow, but who are these companies that are suddenly energy billing experts delivering customer service excellence to millions of businesses? How do we know they will be better than what we have now? Yes, we’d all like cheaper energy and better service, in fact it would be wonderful to pay as little as we can and never have to think about contacting our energy provider because everything is always 100% accurate, timely and transparent. But this auction idea does nothing to bring that about, whatsoever.
I’ve got some disclosure to make here, I used to run an independent energy supplier and I thoroughly welcome Ofgem’s belated attempts to promote and retain competition in the market. But that is about improving a malfunctioning marke,t not destroying a working model and risking total chaos. New entrants need to be quality, well-run businesses, putting the customer at the centre of what they do and to lead the Big 6 by example. Ripping the market to shreds and putting the onus on new entrant suppliers to grow beyond their capacity and capability too quickly is simply madness.
Ms Hillier rather flippantly added: “Whether we would go fully up to 100% is up for grabs. But 20%t is peanuts, really. It needs to be much higher ... We would work from 100 per cent down, rather than from 20% up, and ask: ‘What would work?’”
Mark Powell, a partner for power and utilities at KPMG was quoted in the FT as saying “If [the Big 6] were forced to auction their electricity, then I think a lot of them would just duck out of the retail business, in the long term, that might not be a bad thing because they’re not always very good at it, but in the short term it would cause chaos.”
The 100% proposal has not been welcomed with open arms by independent suppliers either. Co-operative Energy’s business development manager Nigel Mason has said “Twenty% is a sufficient threshold to satisfy the current needs and the needs for the foreseeable future of new entrants,”.
So what is behind this call for revolution from Ms Hillier? Is it upping the ante knowing that it will never happen, but providing a tough image? Is it a genuine belief that how you promote competition is by compulsorily destroying the business model of anyone who becomes too successful (I hesitate to say good)?
Ultimately we need a competitive energy market, in which businesses can find the best deal for themselves with ease, have security of supply and predictability of cash flow and be able to treat energy like any other commodity they need in their business... flexible, track-able and preferably requiring you to pay only for what you use. Simple really. The businesses can be as big and successful as they want, auctioning off the energy isn’t the answer, strong customer focused, dependable, honest and reliable businesses are, whatever their shape, size and profits.
Having said all of that, I’m really keen to hear what you think of Ofgem’s 20%, Meg Hillier’s 100% and any other ideas you have for delivering working competition in business energy (clean and not libelous please)
Get in contact now and help us bring some sanity back to the debate
Fly with the Family Throne*
Image by Epiclectic via Flickr
According to a study published by the Unquote Companies Group earlier this year, employees of family businesses work nearly a whole day a week more than other businesses in the private and public sectors. Not only this but they also have the most satisfied workforces in UK business, achieve greater staff loyalty and provide a better sense of job security.
Sounds pretty good... so surely our family businesses are feted by consumers, politicians and authorities alike?
Well unfortunately that is not the case.
Earlier this year, the CBI director-general John Cridland called for greater focus on such companies following evidence that they were responsible for most of the private sector job creation of the last 10 years.
“It’s my belief that the mid-cap in the UK is our forgotten army,” Mr Cridland said.
“We don’t talk about it in the way that Germans talk about their Mittelstand. We don’t nurture those companies and we don’t focus capital for development and government policies on those companies for growth.”
As way of background, Germany's Mittelstand companies employ 70% of all employees in private business, many are export-oriented focusing on innovative and high value manufactured products. They are typically privately owned and based in small communities.
In contrast, just 21 per cent of UK workers are employed by family businesses. Only a fifth of these are in manufacturing, deemed crucial to Britain’s economic revival.
The findings are being seized upon by campaigners who want to build a British equivalent of Germany’sMittelstand. And it comes as no surprise when you consider that according to Stanley Siebert, professor of labour economics at Birmingham University, “Family businesses tend to treat employees much more transparently and consistently than other employers, in particular, family businesses encourage long-term employment. The closer relationship between bosses and staff makes workers feel much more included...more involved in the success of the firm, far less alienated from decision making, and far more valued by their company.”
He is not alone in his opinion.
Roger Pedder, chairman of the Unquoted Companies Group, said: “Family businesses think long term. Investment can be over generations and the owners are committed to the business rather than simply providing short-term risk capital.”
And Chris Kelly MP, chairman of the all-party parliamentary group for family business, leads the battle cry for reform of the support that the UK gives to family businesses by stating “The German Mittelstand has been the backbone of Germany’s economic success for the past 60 years and the more we can do in Britain to emulate the Germans in this area, the more successful and balanced our economy will be become.”
So what is the secret of family businesses that encourages this enthusiastic support? Well, a study authored by Manchester Business School on behalf of the Institute for Family Business compared UK Family Business PLCs to FTSE All Share companies and revealed that they:
-
invest more in tangible assets,
-
reinvest enthusiastically,
-
are more prudent with the distribution of profits,
-
have lower debt levels,
-
have lower growth,
-
are consistently more profitable.
In other words ‘prudence’ wins the day at the expense of over excited ambition.
It’s not a surprise then that some of the country’s biggest names are Family Businesses as demonstrated by the latest rankings from the IFB:
|
Ranking
|
Company |
Sales |
|
1 |
Associated British Foods (Kingsmill, Primark and Twinings) |
£10.2bn |
|
2 |
Stemcor (the world’s largest independent steel trader) |
£5.1bn |
|
3 |
Swire Group |
£4.2bn |
|
4 |
Laing O’Rourke |
£3.5bn |
|
5 |
Arnold Clark Automobiles |
£2.3bn |
|
6 |
SCH Group |
£2.3bn |
|
7 |
Bestway Group |
£2.1bn |
|
8 |
JCB |
£2.0bn |
|
9 |
Daily Mail & General Trust |
£2.0bn |
|
10 |
Shop Direct Group |
£1.9bn |
IFB Director General, Grant Gordon, said: “The UK has seen difficult trading conditions in the last year, but there have been some remarkable success stories among the UK’s top family businesses. With family firms contributing almost one third of our GDP the family business sector is becoming an increasingly important part of the UK’s future economic growth.”
Now it’s true that we might not all be chalking up revenues in the billions, but it is clear that the UK SME sector has some fabulous role models in family run businesses, that we have a key role to play in the UK economy and that we have a European neighbour from who we, our authorities and politicians should be learning a lot from.
In the meantime there is plenty we can emulate... prudence is the watchword of any sensible business but there is always more that can be done... not paying too much for the basics is obvious, whether it is business energy, business comms or even business travel.
Some of the characteristics of the Mittelstand companies like employing outside professional management and the implementation of lean practices and total quality management may not be overnight fixes but the combination of a cautious and long-term approach to business with the adoption of modern management practices surely makes the utmost sense in an uncertain environment
As Sly himself once said “It’s a family affair”
* A poor pun on Sly and the Family Stone, the US funk band of the 60s & 70s
‘Air con rage’ affects three quarters of British workers
Does the temperature in your office make your blood boil? Image by renaissancechambara via Flickr
Air con rage is sweeping the nation...according to our most recent survey three quarters (74%) of workers admit to arguing with colleagues over the temperature control.
Apparently, as many as a quarter of workers (28%) regularly get caught up in run-ins or skirmishes with their colleagues over the temperature dial, and a huge 86% of people also confess to moaning about the temperature at work.
This summer (‘What summer?’ I hear you cry) 56% of those polled told us that they’ve been left shivering at work, with 24% taking jumpers into work even at the height of summer. (One of my colleagues sits at her desk with a hot water bottle whatever the weather.)
It seems like looking for the ‘perfect temperature’ to keep everyone happy is like finding a needle on a haystack. Almost three quarters of workers (72%) said that the temperature where they work is never quite right.
Temperature distractions could potentially harm your business too: 12% said that shivering in the office makes them less productive and while 47% believe that air conditioning spreads illness.
That’s not to mention the money you could be wasting on electricity. 65% of people complained that the air conditioning in their workplace is excessive and 68% said that they would prefer fresh air instead of air con in their office.
Regional ‘air con rage’:
|
|
Region |
Workers arguing over air con |
|
1 |
North West |
78% |
|
2 |
Wales |
77% |
|
3 |
Midlands |
77% |
|
4 |
South East |
77% |
|
5 |
North East |
74% |
|
6 |
Scotland |
70% |
|
7 |
London |
64% |
|
8 |
South West |
61% |
James Constant, Director of uSwitchforbusiness.com, commented on the findings:
“Instead of cooling things down, gripes and grumbles over air conditioning are actually sending temperatures soaring in workplaces up and down the country. And we aren’t just talking about icy glares and the odd cold shoulder – three quarters of us (74%) are suffering ‘air con rage’, arguing with colleagues over the temperature control at work.
“These findings should prompt businesses to look into their own use of air conditioning and consider whether they are throwing away money on wasted energy when in fact many workers are too cold. Interestingly, almost seven in ten people (68%) say that they would prefer fresh air to air conditioning so, depending on the premises, opening up the windows may sometimes be a better option. Ensuring that the air conditioning isn’t too cold, or that central heating in the winter isn’t too high, are just some of the steps that businesses can take to cut down on their energy costs as well as keeping staff happy.”
Got a story about air con rage in your office? Leave us a comment...
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