For much of 2022, the UK fashion industry has struggled to cope with soaring energy prices, largely boosted by Russia’s squeeze on European supplies and February’s invasion of Ukraine.
High gas and electricity prices pushed inflation to 10.1% in July, the highest since February 1982. Last month, the Bank of England predicted that the UK would slip into recession at the end of his 2022, and warned that inflation could reach her 13% in October.
Drapers explores the true costs of the energy crisis in the fashion industry and whether the new prime minister’s support is well-rounded.
Department store chain Beales told Drapers last month that its utility bills had more than tripled from £45,000 to £150,000.
Several other fashion companies have reported a four-fold increase in energy costs and have introduced various measures to reduce their energy usage.
“Our energy contract is coming to an end and we are thinking [the new contract] It’s about three to four times the previous price,” said the CEO of a clothing company.
“Like many other companies, we’ve been looking at ways to mitigate that cost, such as upgrading LED lighting and air conditioning units. We’re also looking at lowering temperatures a bit. , it’s not. It’s under our control.”
The CEO of a menswear brand whose utility bills have doubled takes a similar approach. I feel a little colder than usual.
“Also, we used to leave the door open as a welcome gesture, but that may have to stop. to see if you actually need it.”
The Federation of Small Businesses said that between February 2021 and August 2022, electricity costs for London stores with annual energy consumption of 30,000 kilowatt hours (kWh) will increase from £4,700 to £21,200 and gas costs will increase. I’m assuming it did. Increases from £1,350 to £7,050.
Martin Foster, managing director of Cumbria-based independent retailer Lakeland Leather, is also exploring ways to mitigate its impact through its 15 stores. Lock new contracts at a lower price for an additional two years. However, some stores that have recently renewed contracts are priced about two to three times what they used to be.
“Usually if you have a long-term contract with your energy supplier, it will be cheaper, but now it is the other way around and there is so much uncertainty that a one-year contract is cheaper than a two-year contract.”
Adam Mansell, CEO of the UK Fashion and Textile Association (UKFT) said: Consumer spending capacity. “
The fashion industry, like other businesses and households, has sought help from the government over the past few months to resolve the crisis.
Responding to calls for support, new Prime Minister Liz Truss announced in parliament on 8 September that the typical household energy bill would be fixed at £2,500 for two years from 1 October. The company will be capped on energy costs for six months at the same price per unit that households pay under the government’s new plan, or kilowatt-hours (kWh).
Six months after that, ministers plan to provide “focused support” to “vulnerable industries”, with a review expected within three months. It’s not clear if retail stores will be included.
Many companies welcomed the assistance provided.
John Bason, CFO of Associated British Foods (ABF), owner of Primark, told Drapers: Looking at the rapidly rising bill, it’s a very worrying prospect for consumers, and the price cap has removed a great deal of uncertainty.”
“Half a year, I think. [price cap] It’s a great start,” said the owner of a women’s clothing brand.
“This is good news for the fashion industry as it means we can move forward in a more positive way. You can build confidence towards the /Winter 22 deal [period].”
But others expressed concern that not enough was being done and called for broader action.
The CEO of a clothing company said, “We are not thinking of introducing an energy cap. [on businesses] Address the root cause of the problem.The Entire Energy Pricing System Is Broken and Needs Intervention [to examine the make-up of the price]”
As one clothing and lifestyle retailer CEO said: [Truss] Price caps have already put consumers and businesses in a cautious mindset that doesn’t really help. “
Matthew Sims, CEO of the Croydon Business Improvement District (BID), which is funded and represented by companies in South London town centre, said: I’m here. There is no time to wait for review. Businesses need to act, and they need to act now. “
The fashion industry is also calling on the new government to overhaul business fees that require a “major overhaul”.
Last October’s Autumn Budget gave SMEs in the retail, hospitality and leisure sectors a 50% discount on business rates, up to £110,000. The scheme is open to companies with appraised value up to £15,000 and covers the financial year 2022/23.
In February, the government began discussing a potential online consumption tax to ease the business tax burden on high street stores. A three-month government consultation on whether to introduce an online sales tax ended on May 20. No updates have been made since then.
The CEO of a menswear brand said: [than the current 50%].
Andrew Goodacre, CEO of the Association of British Independent Retailers, agreed:
Lakeland Leather’s Foster said: [into business rates] But the store continues to pay more than the rent. We welcome the business tax relief that some smaller stores are eligible for, but it sidesteps the problem, it doesn’t solve the real problem.”
Bruce Findlay, managing director of retail at property owner Landsec, said:Small and medium-sized enterprises [small and medium-sized enterprises] – Beneficial in stopping the suffocating effect on your daily routine. “
A government spokesperson said in response to retailers’ concerns:
“We are currently offering a 50% business tax rate reduction to businesses across the UK, freezing alcohol tax rates on beer, cider, wine and spirits and cutting employers’ national insurance. It is in addition to the billions of grants and loans provided during
Energy costs will undoubtedly remain a concern for fashion retailers as the industry prepares for a harsh winter. But the government’s energy price cap could boost consumer confidence and provide a respite space for retailers struggling to keep their stores running.
Top 3 energy saving tips
Bobby Lane, CEO of Factotum, which connects small business owners with professionals in various fields, offers three tips on how retailers can adapt to an uncertain energy market.
- Reduce energy usage: Retailers can consider practical steps to reduce energy usage, such as energy-efficient light bulbs.
- fixed rate contract: If you can find a fixed-rate deal that retailers can agree on, you can plan ahead and make decisions accordingly. However, it is an uncertain market and fixed rate contracts can be more expensive.
- Make a contingency plan: It is more important than ever to understand the risks associated with energy market uncertainty, plan ahead and plan for the unexpected. Retailers should factor all potential energy increases into their cash flow projections to ensure they have sufficient cash reserves to sustain their business.
