FLOATING energy costs could force some companies to choose between cutting production, downsizing, or ceasing trading.
We are already speaking to companies that are under threat in terms of their profitability,” said Gerard Brady, chief economist for the Ibec group of companies.
“One thing is the closure, like the permanent closure. The other thing we’re hearing is companies that are going to close some of the business. They stop producing a product when it has low margins. Or they have to lay off employees temporarily.
“We had a retailer who was talking about small shops whose energy costs were between 50,000 and 150,000 euros. We’ve spoken to larger manufacturing sites where we’ve seen costs go from around €20m to over €100m. Very few companies have the margins to support this.”
This weekend, Irish energy company SSE Airtricity announced a 35 percent increase in its electricity bills and a 39 percent increase in gas bills.
It follows a surge in European gas prices over the past week, although on Monday prices fell the most since March after Germany said its gas supplies were filling up faster than planned.
European Commission President Ursula von der Leyen said in a speech in Slovenia on Monday that “skyrocketing electricity prices are now, for a variety of reasons, revealing the limitations of our current electricity market design” and announced that the bloc “is working on emergency intervention and a structural reform of the electricity market.” electricity market”.
EU leaders will meet on September 9 to discuss the crisis.
Price hikes are likely to push Irish inflation “well into double digits” this autumn and winter, said Conall Mac Coille, chief economist at stockbroker Davy, as firms are forced to pass on rising costs to consumers.
Prices here rose 9.1 percent in July, or 9.6 percent according to the EU’s harmonized measure. Inflation data for August is due on Wednesday.
Smaller businesses in the retail, distribution, hospitality, manufacturing and food processing sectors will be hit hardest, according to the Irish SME Association (ISME), which has asked the government for Covid-like support to see businesses through the energy crisis.
“The cost of government inaction in terms of closing businesses will be far greater,” ISME chief executive Neil McDonell said last week.
ISME National Councilor Finbarr Filan, who owns the Centra business in Sligo, said his monthly electricity bill will increase from €3,500 to over €11,000 in 2023 and he “cannot sustain ongoing cost increases of this magnitude”.
This was announced by the head of the Association of Irish Exporters, Simon McKeever Irish Independent last week that smaller companies can’t afford further cost pressure because they have a lot of capital tied up in inventories – a reaction to Covid and war shortages.
“I’m very concerned about the price of electricity, the shortage of gas, the potential shortage of electricity and the ability of companies to pay for the increase in costs,” he said.
https://www.independent.ie/business/irish/businesses-to-cut-hours-staff-or-shut-outright-as-energy-bills-spiral-41945590.html Businesses are having to cut or close down hours and staff as energy bills soar