9th September 2022
Bite-sized business news from the UK and beyond
- Energy rescue package unveiled
- Online car dealer slashes workforce again and exits Europe
Energy rescue package unveiled
Yesterday newly appointed prime minister Liz Truss announced new measures to help households and businesses cope with rocketing energy prices.
From October, a new ‘Energy Price Guarantee’ will mean a typical UK household will pay an average of £2,500 a year on their energy bill for the next two years.
This compares to the current price cap of £1,971 which was due to rise to £3,549 next month (and likely £5,400 a year in January). The new lower price cap includes getting rid of the green levies.
The £400 discount on bills for all homes announced earlier in the year (paid as £66 a month over winter) will continue. That will take the average payment to £2,100 a year. That’s still nearly double the £1,277 it was 12 months ago.
Businesses and public sector organisations like schools and hospitals have been promised “equivalent support” for six months – with ‘more vulnerable industries’ getting help thereafter - but full details of the plan have yet to be revealed.
The government also announced plans to boost the UK’s energy supply with the aim of reducing the country’s reliance on international sources, something that’s been blamed for the current crisis. Measures include lifting the ban on fracking and approving more oil and gas exploration in the North Sea.
How much will it cost?
Truss avoided giving a figure on the total cost but analysts estimate it could be around £150bn. However as the government will pay energy suppliers the difference between what they pay for power in the volatile wholesale markets and the capped consumer price, the final figure won’t be known until 2023.
The package will be paid for by increasing borrowing rather than raising taxes, something the new PM has been adamant she won’t do.
Zooming out: The package will come as welcome news to the many that were worried about how they would pay for their energy bills this winter. Although the policy will reduce inflation – currently at a 40 year-high of 10% - and limit the size of a potential recession, economists warn that it will also lead to higher interest rates and government debt.
Other stories to keep you in the loop
- European Central Bank raises rates by 75 basis points to tackle soaring inflation
- Ernst & Young splits into separate audit and advisory businesses
- Decathlon sees surge in demand for refurbished sports gear
- Atom Bank picks advisers for IPO
- Primark owner expects lower profits as energy bills rise by £100m
- Deloitte sees global revenue increase nearly 20%
- Wagamama owner’s profits jump but heatwave weighs on summer dining
Online car dealer slashes workforce again and exist Europe
Yesterday British online car retailer, Cazoo, announced it would cut 750 jobs and close its European operations in a bid to save costs. The move comes as the company warned that consumer confidence has declined and a recession was likely on the cards.
Some background: Cazoo burst onto the car dealership scene in 2018, calling itself the ‘online used car disruptor’ and promising to ‘revolutionise the car buying experience’ in a market it says is worth £500bn.
It has spent millions on sporting sponsorship deals and TV adverts and, much to the annoyance of the UK government, chose to raise billions when it listed on the New York Stock Exchange last year instead of London.
But the company is bracing itself for serious consumer headwinds
For the second time in 2022 Cazoo has cut 750 roles, the first time in June affected UK roles and this time round all employees in France, Germany, Italy and Spain will be made redundant.
The company said a challenging macroeconomic backdrop caused by rising inflation and interest rates has driven up the cost of living and hit consumer confidence. In preparation for an economic downturn Cazoo wants to protect cash by cutting its workforce and focusing on its home market in the UK. Pulling out of Europe will save the company £100m a year and remove the need to raise more funding.
Zooming out: Amid a cost of living squeeze, consumers are already cutting back on big ticket items like cars. Cazoo is trying to avoid the fate of its rival online car retailer Carzam, which went bust earlier this summer, months after it had raised £112m from investors.
Stat of the day
Queen Elizabeth II met with 15 prime ministers and 13 presidents during her 70 year reign
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