ICSM Retail Business News: credit insurer pulls cover for Iceland suppliers as energy price hikes hit overheads
By Harry Mottram: Giorgia Wright of the trade publication Retail Gazette has reported on problems facing the Iceland supermarket and grocer Iceland following the rise in energy prices. Due to the stores use of huge chest freezers their energy bills have gone up disproportionally compared to some of their rivals putting pressure on costs.
She wrote: “A major credit insurer has pulled cover for suppliers to Iceland as rising energy costs pile pressure on the frozen-food retailer ahead of a crunch refinancing. In December, Coface is said to have reduced cover on Iceland to zero. Last year fellow insurers Allianz Trade and Atradius both reduced their coverage levels for Iceland. Credit insurance protects suppliers against the risk of a retailer going bust between the point an order is delivered and payment received. The removal of cover can prompt suppliers to demand payment upfront, squeezing a retailer’s cashflow.”
Ian Carrotte said it wasn’t just an issue confined to freezer centres but to all retailers and those in hospitality. He said their customers expect their premises to be warm in winter and cool in summer meaning electricity bills and bound to be high – but with recent price increases some are being pushed into insolvency.
He said: “ICSM understands that Iceland’s annual energy bills more than doubled last year from £70 million to £155 million. Those kind of hikes makes it difficult to plan ahead even with building in agreements with renewable-energy for future years to guarantee lower prices.”
One direct result of the problem is the decision by Iceland is that others will follow suit to cut down on the use of large freezers and chill cabinets and sell more room temperature product ranges.
With energy bills so high a whole range of businesses are looking to cut down on usage from turning down the heating to insulating offices and warehouses. From the 31st March the Government help for businesses changes with a new system put in place – more details at https://www.gov.uk/guidance/energy-bill-relief-scheme-help-for-businesses-and-other-non-domestic-customers
The main concern for businesses is the ‘domino effect’ of a loss of confidence in a company.
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For details for the work of the journalist Harry Mottram visit www.harrymottram.co.uk