Covid19: Energy Supplier concerns over bad debt grows ahead of furlough scheme end

Covid-19 impact

Energy suppliers such as Bulb and Centrica have publicly expressed concern that they expect a sharp rise in the number of households defaulting on their energy bills in the second half of the year.



Back in March when the UK was first locked down in an attempt to stem the spread of the Covid-19 virus most businesses were forced to shut their premises. Millions of employees who were unable to work from home were put onto the furlough scheme that has cost the taxpayer billions.



With lockdown easing, the furlough job retention scheme is due to end in October and many analysts are forecasting a surge in unemployment as businesses struggle to retain their staff.



Read more: The post Covid-19 Energy Forecast: What Comes Next?

Bad timing for energy suppliers

The predicted rise in energy bill defaults will hit energy suppliers hard as the autumn is the period where they normally have to hit payment deadlines for climate change and renewable electricity policies. As a consequence, it’s the time of year that sees typically sees those suppliers that are already struggling go out of business.

“The thing that we’ve been very conscious of since March is the risk of a large number of customers getting into financial difficulty and not paying their bills. I know the government has provided a huge amount of support through things like the furlough scheme. But there is a strong risk that if there’s a second wave and if there’s high unemployment that a large number of businesses in the UK will find it challenging with non-payment by customers,” said Bulb Energy’s Chief Executive in an interview with the Financial Times. 

Is support for energy suppliers enough?

Recently Ofgem launched its £350 million support scheme that is designed to support energy suppliers that did not qualify for one of the government’s COVID loan packages.

However, when up against the potential implications of the end of furlough some suppliers are concerned that Ofgem’s scheme will not be enough to support smaller suppliers when Autumn arrives. 

Record economic slump

Energy suppliers are naturally concerned as often in times of economic hardship the payment of energy bills are the first things financially struggling households stop paying.



The economic situation appears grim with the latest ONS figures showing that as a result of the lockdown the UK is now in a record-breaking recession.



The data showed that the UK economy fell into its deepest recession on record with quarterly output collapsing by 20% – the biggest slump of any other major European economy.



A glimmer of hope?

Despite the dismal figures, there are signs of hope in the UK economy. The Bank of England’s chief economist, Andy Haldane is predicting that with the easing of the lockdown the economy will rebound strongly in the coming months.

Strong consumer spending has seen online retail sales increase 70% to bring them above pre-pandemic levels and a new report released by IHS Markit/CIPS showed that businesses in the services and manufacturing sector grew at their fastest pace in more than five years in July.

Haldane added that the UK’s GDP is likely to rebound by over 20% in the second half of the year and that the economy has been recovering about 1% per week.

“While that leaves activity well below pre-COVID levels, the UK has already recovered perhaps half of its losses,” Haldane said.

Energy suppliers and currently furloughed employees will be hoping he’s correct.

Read more: Ofgem announces £350 million support scheme to help struggling energy suppliers

Further Reading

Bulb Energy ordered to pay £1.76 million by Ofgem and energy price cap to fall to lowest ever level in October

New rules planned for Energy Suppliers as Ofgem vows to protect small businesses from unscrupulous Energy Brokers

How a CRM makes Energy Billing easy for Energy Suppliers

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