Businesses Struggling To Keep Doors Open As Energy Costs Surge
New Zealand businesses are suffering under the yoke of rising energy costs, with many reluctant to speak out for fear of commercial retaliation from major energy suppliers.
That's the main take-out from a new survey carried out by the Auckland Business Chamber, together with policy and advocacy organisation the Northern Infrastructure Forum (NIF). Survey responses were garnered mainly from SMEs in the Upper North Island, with manufacturing the most heavily represented sector.
Chamber CEO Simon Bridges says the survey findings show that energy costs are right at the top of the list of concerns for businesses, in what is a very challenging operating environment.
'Nearly 90% of respondents say that energy costs have increased in the past year, and just under 50% describe those costs as highly concerning. When energy costs combine with the pressure from weak market demand, inflation and increased compliance costs, the result is that many businesses are struggling to keep their doors open.'
Mr Bridges says one unexpected, and troubling, insight from the survey was the reluctance on the part of businesses to be identified when sharing their struggles with energy costs, for fear of commercial repercussions.
'Many of the businesses we spoke to – especially those dependent on gas supply – were really uneasy about speaking publicly, for fear that it could jeorpardise their ability to secure future energy contracts with the gentailers, who control close to 85% of the retail market. Whether this fear reflects an actual or perceived risk, it points to serious issues with the way market power is being exercised, and is really worrying.
'It's high time the Government had a good, hard look at the vertically integrated gentailer model, and the impact it's having on the performance of the sector.'
NIF Executive Director Barney Irvine says the survey results also underline the drag that energy costs are placing on New Zealand's growth and productivity, and on people's livelihoods.
'As a response to rising energy costs, 52% of business surveyed say they have increased the prices they charge to customers; a quarter say they cut back production; the same proportion say they have laid off staff; and just under 20% have cancelled or deferred investment. Unnecessarily high energy costs impact on everyone.'
Businesses are looking to the Government for leadership, he adds.
'Over three-quarters of survey respondents believe that the Government should treat addressing energy costs as a high or very high priority, and they're absolutely right.
'The Government has a good sense of what needs to be done to turn the performance of the sector around for the long-term; what's needed now is swift, decisive action.'
In particular, the Chamber and NIF want to see the ten-point Energy Action Plan they launched in February this year – which focused on strengthening sector stewardship, improving resilience, and increasing generation and competition – incorporated into government policy.
Key findings from the survey include:
Nearly 90% of respondents say that energy costs have increased over the past year, with over 40% reporting that the increase has been large or very large
Just under 50% of respondents describe energy costs as highly concerning (i.e., a rating of 8-10 out of 10), similar to the level in concern in relation to market demand, inflationary pressure and compliance costs
Over 60%% report an impact on their business as a result of rising costs, with 34% describing the impact has as large or very large
As a response to rising costs, 52% of respondents say they have increased their own prices, while 25% report having cut back production, and the same proportion report having laid off staff. Just under 20% have cancelled or deferred investment
Over 80% expect prices to increase again in the year ahead
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