Iceland boss Richard Walker has called on ministers to issue more support for businesses struggling with sky-high energy bills.
Without a price cap on businesses’ energy bills, smaller firms would surely collapse, the supermarket’s managing director told CityA.M.
An absence of further support for businesses was “really serious,” as the colder months approach, Walker said.
“They need to do something,” he said, pointing to a variety of measures including a price cap for businesses, under-writing energy bill loans as occurred with support loans in the pandemic, as well as specific tax deductions on energy.
“There’s a lot of different things they can do,” Walker said. “If they don’t, it will mean bankruptcy, job losses and further price rises for consumers.”
Through the roof
The frozen food giant has itself experienced its energy costs going “through the roof” in recent months, its boss added.
“There’s not much we can do, that’s the reality,” he said. “It’s very, very challenging.”
In a note to investors on Tuesday evening, Moody’s downgraded Iceland to B3 from B2, with the outlook on all ratings changed to negative from stable.
The US financial services firm said it anticipated the retailer’s electricity bill would more than double in fiscal 2023, ending March, compared to the prior year.
This would reduce Iceland’s EBITDA and cause leverage to increase more than previously anticipated.
“Partly mitigating rising costs of goods sold, energy costs and personnel expenses, Iceland continues to simplify processes in its stores and supply chain in order to reduce costs and preserve margins,” the note added.
Monster inflation was set to “to erode the already thin operating margins of UK grocers this year,” with Iceland particularly vulnerable given its “greater focus on energy-intensive frozen food.”
Iceland has teamed up with upstart energy supplier Utilita with a roadshow to educate consumers on the most energy-efficient ways of cooking food and changes to packaging.
The retailer is also to start selling more air-fryers, in a bid to ease the cost of living crisis in the short term and in the long term to “change cooking habits.”
Shoppers have been adapting their weekly shopping habits in the face of rising living expenses, with Walker suggesting more consumers could turn to frozen food.
Depleted harvests in Europe, as war wages on between Ukraine and Russia, would result in “a lot of constrained supply” of food over the next few months, Walker predicted.
Reduced stock of fruit and vegetables would lead to prices increasing, meaning people could switch to frozen produce. “Maybe even frozen pasta,” he added, pointing to food that faced pressure from macroeconomic challenges.
Ministers must also “step up and do more,” to help struggling households while it was “incumbent” for every business to do what they could to help consumers, Walker said.
Support would also “make long term business sense,” as shoppers would “remember it [the help] in the good times.”
Bosses of smaller companies were reporting four or five-fold increases to their energy bills, according to the Federation of Small Businesses (FSB)’s national chair Martin McTague.
““The cost of living crisis can’t be solved without addressing the cost of doing business crisis,” he said earlier this month.