Npower cuts 80pc of UK workforce as losses double

Energy giant blames price cap for putting consumer business in a ‘critical and unsustainable’ position

ENERGY titan Npower is axing at least 4,500 jobs after warning a price cap has left its consumer business in a “critical and unsustainable” state.

The loss-making company is to slash almost 80pc of its UK workforce in a battle to stay afloat, dealing a huge blow to staff before Christmas.

Npower has suffered a torrid year amid an influx of cut-throat competitors offering cheaper deals, while profits across the industry are down after the Government imposed an energy price cap at the start of 2019.

A raft of small electricity companies have sprung up to take on Npower and other so-called Big Six players, but it is feared many are offering unsustainably cheap deals that are damaging established firms. At least 28 of these new competitors have gone bust since the start of 2018, according to data obtained by The Daily Telegraph under the Freedom of Information Act.

In a call with analysts following the announcement yesterday, Johannes Teyssen, chief executive of Npower owner E.on, lashed out at ministers and regulators for the state of the market.

He said: “I would like to take the opportunity to send a crystal clear message. We need to see a paradigm shift in the regulatory and political approach to the market in the UK.”

Mr Teyssen warned that the UK could not expect to attract any “meaningful investments in the energy market … if the regulators are not able to ensure a reliable framework”.

He also took aim at industry watchdog Ofgem, blaming it for failing to prevent ill-equipped energy suppliers from starting up, and said: “Larger, more prudent companies have had to pay for the mess left behind by numerous newer entrants that have subsequently crashed out.”

E.on plans to shift more than 2m households signed up with Npower on to its own IT systems.

In 2015, Npower was fined a record £26m by Ofgem after it botched the introduction of its own new computer network and left customers with late and inaccurate bills.

The latest restructuring was described as regrettable by E.on, which took over Npower earlier in 2019, and said jobs will be lost over the next two years.

Unions estimate that most of Npower’s eight UK sites could be closed, making the majority of the company’s workers redundant in the process, as the energy supplier seeks to aggressively cut costs in the face of gruelling market conditions.

Npower said that the decision to cap electricity rates has eaten into its profits. When the cap was introduced, regulator Ofgem said that it would save 11m people an average of £76 a year.

Ofgem defended the price cap saying that it was intended to protect consumers. The regulator added: “How suppliers decide to respond to the price cap in practice is a commercial decision for the suppliers.”

Union bosses blamed both Ofgem and E.on for the job losses, claiming a combination of poor management at the company and bad regulations had led to the firm’s current malaise.

Dave Prentis, general secretary of the Unison union, said: “The UK energy market is in real danger of collapse. If nothing is done, there could soon be other casualties.”

On Thursday, Npower reported a €167m (£142.4m) loss for the first nine months of the year – more than double its €71m loss in the same period last year.

Announcing 4,500 job cuts just weeks before Christmas is never a good look, so bah humbug to E.on boss Johannes Teyssen for a cynical piece of corporate re-engineering at UK arm Npower that would make Ebenezer Scrooge proud.

The German energy giant says it cannot tolerate losses at Npower’s parent company Innogy for much longer and must “take all necessary action to return our business to consistent profitability”, but come on, couldn’t the company have waited a little longer?

Would another few weeks have made such a significant difference to a business that it admits has been struggling for years, so that working families could be spared an utterly miserable Christmas period?

It is this sort of ruthless behaviour that fuels Jeremy Corbyn’s war on business and underpins the Labour leader’s dangerous plan to nationalise large swathes of the economy.

And the power companies surely don’t need reminding that they are likely to be among the first to be dragged into state ownership if the Opposition get the keys to Number 10. Corbyn claims the Big Six have been ripping off households for years.

Still, there are two important points to make. The first is that the advent of switching websites has meant that it has never been easier to move suppliers.

Customers have been voting with their feet in record numbers.

Last year, 5.8m households switched, the largest number ever, and this year is on course to be an even larger number.

Meanwhile, according to regulator Ofgem, the Big Six have lost a combined 1.3m customers since June 2018, so their stranglehold has been weakened. Npower says it lost another 261,000 customers in the third quarter, bringing total losses to 447,000 so far in 2019.

The second point to make is that the Government has already intervened heavily in the energy sector with devastating consequences.

While the price cap introduced under Theresa May has been successful in forcing the Big Six to push down their prices, it has obliterated margins and profits, prompting some severe restructurings including the one just unveiled at Npower.

The combined impact of switching and the price cap has pushed it deeper into the red this year. It has just posted a nine-month loss of £142m and is on course for total losses of £214m in 2019. SSE had hoped to merge with Innogy but instead pulled out of the market altogether citing the price cap as a key factor.

Meanwhile, by pushing down prices, the cap has also triggered the collapse of a slew of upstarts. At least 28 electricity suppliers have gone bust since the start of 2018. Last month, Toto Energy went under just three months after taking on the customers of stranded rival Solarplicity.

Whatever the problem, government interference in markets is rarely the answer.

Hidden debts at Thames

Over at Thames Water, the threat of nationalisation has triggered a collective state of panic with bosses desperate to demonstrate that the company has reformed its ways.

Its half-year results are stuffed with examples of good behaviour from reductions in leakages to a new “relationship management and billing platform”, and fewer sewer flooding and pollution incidents. Offshore ownership and dividends have been abandoned too.

It could be mistaken for a plea for clemency from a disapproving new hardline government but then this is a company that has been repeatedly fined for poor service, leaks and environmental accidents.

However, buried in the numbers are several unfortunate reminders of its controversial ownership including an eye-watering debt pile of nearly £12bn, the majority of it a hangover from when Thames was in the hands of Macquarie.

The Australian investment house has since moved on, leaving the water supplier struggling to clean up its act.

The interim results also show that Thames paid nearly £230m to service its debts and a further £161.5m for a series of complex financial instruments, leaving the company nursing pre-tax losses of £54.5m on £1bn of turnover.

Thames claims its debts are not abnormal for a large utility but Ofwat has said the utility’s borrowings must come down.

When a water supplier is better at financial engineering than the traditional type, something has gone wrong.

‘It is this sort of ruthless behaviour that fuels Jeremy Corbyn’s war on business’