Fears that Npower’s financial difficulties would lead to job cuts are coming true. The firm recently announced it is planning to reduce its workforce by 15% due to ‘intense competition’.
The other main reason cited was the recently implemented default tariff price cap. However, this second reason has been rendered less impactful by the recent price cap raise. Along with other major suppliers, the price cap increase allowed Npower to raise their customers’ default tariff rates by 10%.
Unfortunately, this has not prevented the firm announcing the massive job losses. They also predict further financial difficulties throughout the rest of the year.
Npower to Release 900 Workers
Concerns were originally raised about staff numbers when the planned merger with SSE failed at the end of last year. The merger would have seen SSE effectively take Npower over, turning the Big Six supplier group into a Big Five. When the merger fell through, there was a lot of uncertainty as to what would become of the company.
There was the possibility that Npower would remain under the umbrella of Innogy, its parent company. Innogy itself is a subsidiary of German energy giant RWE, which was believed to want to retain ownership of Npower. However, it has since emerged that the supplier will be taken over by fellow German energy giants E.ON instead. The ownership transfer from Innogy to E.ON will be a complex asset swap that unfortunately won’t prevent the job losses.
The 900 jobs being cut will occur over the course of 2019. Npower says that it will be suffering significant financial losses throughout the year, despite the transfer of ownership to E.ON. In fact, it is suspected that the ownership transfer will ultimately cost even more Npower jobs.
Npower Says Energy Pricing Levels are ‘Not Sustainable’
RWE’s Chief Executive, Paul Coffey, said,
“The retail energy market is incredibly tough. Ofgem forecasts that five of the big six energy companies will make a loss or less than normal profits this year owing to the implementation of the price cap. And with several recent failures of new energy suppliers, it is clear that many have been pricing at levels that are not sustainable.”
“Even with these reductions, we still forecast significant losses this year but we’re doing everything we can to minimise them whilst continuing to focus on service and value for our customers.”
Are Npower Right to Blame the Price Cap?
It is true that many new suppliers have collapsed recently. A total of ten suppliers closed for business over 2018 and the first month of 2019. Ofgem is already drawing up more robust licensing requirements to ensure new suppliers are equipped to handle fluctuating energy prices.
However, the industry regulator also took something of a sneaky swipe at Npower’s apportioning of blame on the price cap. A Government spokesperson responded to Mr Coffey’s statement saying,
“Ofgem designed the energy price cap independently, through consultation with industry, so that an efficient supplier can continue to thrive.”
If you believe your business can benefit by shopping around for a more efficient supplier offering a better tariff, contact Business Save and their team of highly experienced energy experts.