Firms 'face pressure on costs with energy price hikes and bad economic outlook'

Rising energy prices and a bleak economic outlook are set to pile the pressure on businesses trying to manage costs and the Brexit fallout in 2017, according to the boss of Yu Energy.

The UK energy market is a markedly "different world" than it was 12 months ago as wholesale prices and economic uncertainty start to hit suppliers, Bobby Kalar said.

The head of the AIM-listed firm - which supplies electricity and gas to small and medium sized enterprises (SME) - told the Press Association that it will be harder to hammer out fresh contracts as the company is forced to pass on price hikes to clients who face challenging business conditions themselves.

"There are various SMEs out there that have been impacted by economic forces ... or Brexit, and they will be using that as an opportunity to negotiate hard," Bobby Kalar said.

"We're trying to reduce their energy bills but trying to maintain our margins as well," he explained, adding that wholesale gas and electricity prices have risen between 30-40% over the last three to five months alone.

"If you're talking about the challenges, it's getting in front of the customer and making them understand that we're in a different world to what we were eight to 12 months ago."

Rising costs have already brought down at least one supplier.

Budget firm GB Energy blamed wholesale price spikes when it went bust in November, leaving 160,000 customers in limbo as they wait to be transferred to a new firm.

But Mr Kalar said contract hedging has been a successful strategy that has effectively shielded the business from price volatility.

In terms of customer totals, Mr Kalar said: "We're finding that we're losing some, and we're winning some, but I think our strategy is working."

Investors seem to have confidence in the company's game plan, with shares up over 60% since it launched its market flotation in March 2016.

Regardless of market challenges, Mr Kalar says he is confident the company will meet operating profit targets of £2.3 million for 2016.

Less than a year after its initial public offering, Yu Energy is eyeing plans to branch out into the water business, which Mr Kalar is expecting will draw in clients who are interested in a one-stop utilities shop.

The company is in the process of applying for licences with industry regulator Ofwat with the possibility of entering the water market in the third quarter of 2017.

"A lot of companies are holding their cards very close to their chest, but I'd like to think that we will be one of the very few numbers of suppliers that can actually offer gas, electricity and water under one banner."