Energy prices putting thousands of companies at risk of insolvency

Its data shows that the recent increase in energy bills could lead previously profitable companies to experience significant losses. As such, many of these companies will be forced to lay off staff to avoid failure.

According to its research, there are 355,000 companies with a turnover of higher than £1m designated as high energy users. Of those, 75,972 are being put at risk of insolvency due to energy price hikes. 

Red Flag Alert estimates that the price increases could cause 26,720 of those companies to fail.

It says these insolvencies will begin in 2023 and are additional to the already high levels being experienced. And, while the statistics are shocking, this data only includes businesses with a turnover of over £1m - there are many more small businesses that will also face failure due to increased energy costs. 

Red Flag Alert predicts that mitigating this decrease in profitability will cost £100bn a year in business support.

Energy-intensive sectors with high exposure to energy costs include wholesale and retail, manufacturing, construction, transportation, agriculture, food and farming. Businesses in the hospitality sector are also at risk as they face a triple threat of increasing energy bills, higher supply and staff costs, and poor consumer confidence.