Over the last decade, there have been several years that could have been called exceptional and it seems now that 2021 has seen the coming together of a number of pressures on utilities.
What has been noticeable however is how many of these issues have actually been of a more global nature. No longer are the biggest problems facing UK utility businesses totally UK based.
On the contrary, we’d argue that 2021 has been the year that local utility businesses have needed to think truly global.
If we didn’t have a positive appreciation of supply chains before then, 2021 has shown that no country in the world can go it alone and a global supply issue that may seem somewhat mundane and remote at the start, can actually end up having real practical effects on local companies and their customers.
A worldwide shortage of LPG cylinders added to higher than normal demand in the UK has led to a nationwide shortage whilst the difficulty in bringing water treatment chemicals into the UK and distributing them when they are here has caused the discharge of effluent into the sea and watercourses.
And lest we mention the ‘B’ word, the twin effects of Brexit and the pandemic has caused a loss of overseas haulage workers meaning that they initially left the country and failed to return, choosing to work in European markets instead.
Of course, supply chains don’t necessarily mean just operational supplies. In fact, many companies have had issues sourcing capital equipment due to issues
So whilst all of these issues may be of a global nature in the final analysis, they have a real and possibly lasting effect on local utility businesses.
Although green energy has been something of a nice to have for many businesses in the last few years, the landscape has changed and businesses that haven’t made significant shifts in their consumption, generation and sale of renewables will need to think carefully about how the world will look in the future.
Quoted recently in the FT, Andrew “Twiggy” Forrest, chairman of Fortescue Metals Group said that “In 15 years’ time, the world energy scene will look nothing like what it does now. Any country which does not take green energy very seriously, but clings to polluting energy, will eventually get left behind.”
Consumers are becoming much more interested in the green credentials of the businesses they transact with and companies need to ensure that they are able to back up their warm words with real action on renewable energy.
Climate change has now become one of those topics that concentrates everyone’s minds and it is the very definition of an issue that doesn’t respect national borders.
In a demographic sense, it is also an issue that is likely to be more important as the years go on with Gen Z and Millenials more engaged and active.
We have also seen issues that become top of the agenda in one country suddenly take off globally with customers expecting businesses to keep their finger on the pulse and provide initiatives to tackle climate change.
For UK utility companies this means that their customer base is likely to be more attuned to global initiatives such as COP26 and they will vote with their feet if they think their supplier isn’t doing enough.
One of the distressing situations in recent months is the loss of utility retailers, mainly due to the spike in energy prices.
Energy prices are volatile and in politically uncertain times this is ever more the case as producers seek to restrict supply or increase prices and transmission systems such as pipelines fall prey to geopolitical tensions.
There are of course many other reasons for the worldwide increase in energy costs but from a strategic point of view, basing your entire business model on a local sales price that is underpinned by a variable (and volatile) global wholesale cost is asking for trouble.
Retailers, in particular, will need to be cautious when setting fixed price offers and may need to build in fat, reduce the length of deals or make sure they are matched to fixed-price supplies to ensure that they don’t go the same way as many of their departed colleagues.
There can’t be many UK businesses that haven’t found it difficult to recruit the quality of staff they need to grow.
There are a number of reasons for this, with a demographic change in the UK meaning that we have an ageing workforce and many of the baby boomers now retiring.
We’ve also seen an exodus of foreign workers due to COVID and Brexit meaning that the UK has suddenly become a candidates market as far as recruitment is concerned.
With only so many people to go around, it is clear that employers will need to be more creative about how they attract staff and retain the ones they already have.
Unfortunately, this is one area where a global outlook won’t necessarily help, as the immigration rules make it more difficult than ever to bring in people from other countries.
Although it has been talked about for many years, the truth is that for utility companies productivity is the answer here, improving processes and skills of employees and strategically bringing in automation as a way of boosting output when there is an employment shortage.
The last few years have been a salutary lesson for us all as both consumers and businesses.
We’ve seen how reliant we are on supply chains that span the entire globe and how they can be disrupted by issues that may initially seem irrelevant and far away.
We have also seen how big political decisions taken on the world stage have real and lasting implications for a business on the ground.
So any utility business that still clings to the idea that it can insulate itself in some sort of UK silo has seen its thought process decisively challenged.
Companies need to invest in good analysis and implement scenario planning, asking detailed “what-if” questions that challenge some of the fundamental truths about their business model.
Consideration needs to be given to not just the immediate supplier but also the things that affect them. In other words, our thinking needs to go one or two steps further to get to a position where we can spot potentially disruptive developments.
There can also be no doubt that now is the time to finally tackle the productivity elephant in the room. The tightening labour market means that utility businesses need to use automation and integrated systems much more than ever before.
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