Energy debt bankruptcies set for record

Energy suppliers are on course to file a record number of winding-up petitions against business customers this year as companies struggle with soaring energy costs.

There have been more than 400 attempts by suppliers to shut down companies to reclaim their energy debts over the past decade, according to court filings. The vast majority were made by British Gas, Eon and npower, now part of Eon.

British Gas and Eon, two leading business suppliers by customer numbers, between them have filed 30 such winding-up petitions in the first four months of the year. If this were to continue at the same rate, 2023 would be a record year, analysis by Harcus Parker, the law firm, suggests. About half of petitions typically have resulted in the targeted companies being shut down, it said.

Thousands of businesses are struggling with energy costs after Russia’s invasion of Ukraine led to a surge in wholesale gas and electricity prices.

The findings have prompted calls from business groups for a moratorium on winding-up petitions. Harcus Parker is also arguing for a moratorium while it brings a £2 billion class action legal claim against several energy companies over allegedly undisclosed commission payments to third-party brokers, which are widely used to sell energy deals to businesses.

The law firm claims that some of the companies targeted may have had to pay inflated tariffs as a result of what it alleges were “hidden” commission payments. Damon Parker, a partner at Harcus Parker, said: “It appears to us that energy companies have sought to wind up a significant number of entities on the back of contracts that contain ‘hidden’ or ‘secret’ commissions paid to brokers purporting to act for businesses.

“We are acting for hundreds of businesses who are seeking repayment of those commissions. If those claims are successful, it is possible that some or all of these failed businesses ought never to have been wound up.”

The Federation of Small Businesses has warned that more than 90,000 small businesses are at risk after signing up to fixed deals in the second half of last year, when rates were at their peak.

Tina McKenzie, policy chairwoman at the federation, said: “Large energy suppliers must give vulnerable small businesses every chance to pay their bills. If winding-up petitions are being issued in great numbers, without support being provided, then there’s a need for a moratorium to be imposed.”

A British Gas spokeswoman said: “Our debt policy is fair, with robust controls in place. We seek to engage early with business customers to discuss the support and options available and are able to offer extended payment plans where appropriate.

“We do not treat winding-up petitions lightly and only consider them in specific circumstances where there is clear liability, the company has a sizeable balance and appears to be soluble with a healthy asset position. Winding-up petitions account for a very small proportion of our aged debt. We recognise that the current economic climate is difficult for smaller businesses, which is why we committed to a £15 million small business debt relief package for those struggling over the last winter.”

She added that “the relationship between a broker and a business customer is separate from their relationship with British Gas”, all brokers were required to comply with transparency regulations and British Gas had complied with all rules.

Eon declined to comment.

A government spokesman said it had provided businesses with £7 billion in support, and added: “A moratorium on winding-up petitions would be a significant interference with creditors’ rights to reclaim outstanding debts and we have no plans to introduce one at this time.”