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“I’ve never seen anything like it.”
That’s how David Briody, director of Briody Beds, sums up the situation he and thousands of other businesses across the country are currently facing.
Based in Oldcastle in Co Meath, the company manufactures a range of beds and bedding in four local plants, which are sold locally and exported to Portugal.
To do this, it operates a lot of special energy-hungry machines and also relies on transportation to move raw materials and finished products.
It has been operating for nearly 50 years and like most companies of that age has seen many changes and challenges, but none like this.
“We’re really getting hit from every angle,” David Briody said, referring to rising prices in many areas, most of which are driven by energy increases.
“Our energy bills have more than doubled in the last four to five months.”
The business, which employs more than 100 people, had an energy contract at a reasonable rate.
But it was difficult to find another supplier willing to adjust the tariff at the end of the period, such is the volatility in the market.
In the end, the company found a one-year contract, but if the price of wholesale power is too high, it can be broken by the supplier.
It has been hit by a continued and severe increase in other input and raw material costs.
Like most businesses, Briody Beds has been forced to pass on some burdens to customers in recent months.
“You can only drink so much,” says David Briody.
“We’ve raised prices on our products, but you get to a point … where you’re too expensive and you’re not selling anything. So it’s a balancing act.”
“I don’t really know what they can do in the budget. Giving one-time payments and things like that, it’s just putting a band-aid on it, you know. It’s not going to help moving forward.”
This is just the story of one business, but it’s a tale repeated in companies the length and breadth of the country.
As employers’ organization Ebec launched its pre-Budget on Monday, it’s no surprise that energy costs are posing a major threat to the viability of many companies in Ireland.
Some members said that this year, the energy level will be four or five times higher than 12 months ago.
A wide influence
The result is an energy balance crisis for the business sector, which may be more extensive than the epidemic.
This is because there is no business in the country that does not rely on energy in some shape or form.
From small and medium-sized companies without deep pockets, to large energy users with low-margin, high-volume operations, the impact will be wide-ranging.
In addition, there is the question of how long this will continue, with some experts predicting that higher energy costs are here to stay for the medium to long term.
“Businesses are shocked,” said Shan Connelly, head of policy at Chambers Ireland.
“It’s very difficult to predict what the costs will be for businesses as these things continue to increase.”
Maintaining reduced costs is currently impossible, so businesses must look at other options to save energy.
Chambers Ireland has been encouraging members to undertake an energy audit through the Sustainable Energy Authority of Ireland to see where they can cut costs in the short term and become more energy efficient in the long term.
“This can make drastic reductions, often 10-20% less energy used. This is probably the best way to save money at the moment,” said Mr Connelly.
Others are looking for options to make themselves more self-sufficient, which is what David Briody is currently doing.
“Businesses that feel right now are the ones with relatively small margins.”
He is about to install solar PV panels at one of the company’s manufacturing sites, which he estimates will reduce energy costs by 55-70 percent when operational.
However, he has criticized the lack of support from the state, with subsidies only available for solar PV installations with other efficiency measures.
David also lamented how surplus power could not be fed back into the grid to get credit on days the plant was not operating.
“We run a five-day week, so when this system is in operation, it’s generating anything from 15-25 kWh on a boring November day — and the power doesn’t go anywhere,” he said of Saturday and Sunday.
Sean Connelly said other businesses are looking at bringing in on-site generation and storage to produce and store energy cheaply and use it when it’s more expensive, as well as to ease potential disruptions in supply.
Some sectors feel it more than others.
While everyone is being affected, the severity of that impact varies from sector to sector.
The businesses that really feel right now are those with relatively small margins, so areas like hospitality have really struggled over the last couple of years and in many cases are struggling to find staff. With higher energy prices, dinnertime prices are likely to rise significantly, says Shane Connelly.
“And those are the things that really make enterprises on the edge of viability reconsider.”
The pharma and medtech sectors are also very concerned, he said.
The energy regulator’s proposal to impose tariffs is aimed at forcing large consumers to reduce energy use during peak hours.
Those working in the restructuring sector say that while they are seeing significant improvements in demand for their services, they have yet to see as many firms with energy-specific problems as seen in the UK.
Instead, energy is complicating already existing issues.
“There are a number of challenges that businesses face, particularly in the SME sector,” said Declan Tait, managing director of Kroll in Ireland.
These include rising interest rates, lower discretionary spending among consumers, higher energy prices, and early next year, businesses will have to begin paying down their accumulated debt to income.
“I think there are a number of challenges out there and when you add them all up it’s going to be a very difficult situation for a lot of businesses,” Mr Tait said.
“I think businesses in the retail and hospitality areas will suffer the most because of the decline in rational spending.”
The new “challenge light” process, known as SCARP, may be used more in the coming months, when companies face existing challenges and try to restructure.
“My sense is that before the end of the year we will see a normal increase in losses and we will go into quarter one next year,” added Dylan Tait.
So everyone agrees that help is needed from the government and needed quickly.
And it should be focused on the organizations that need it most and delivered in business-friendly ways.
Otherwise, there is a big risk that the lights will go out for many.
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