Covid-19 had a negative impact on companies in different fields: during the first months of lockdowns in 2020, while some plants temporarily shut down, quite a few factories producing garments for prominent fashion houses and brands in Europe managed to stay open, reconverting the production to face masks and PPE.
In 2021 vaccines improved the situation and, while there were signs of recovery also thanks to a consistent consumer demand after many activities reopened, the fast spreading of the Omicron variant of Coronavirus in the last few weeks has been causing a new emergency. While vaccinated people have milder effects, Omicron remains very contagious and this means that staff shortages are being registered in different sectors as people have to constantly self-isolate.
Yet there is another emergency threatening companies at the moment - the cost of energy. All over Europe and in particular in Italy and the UK, natural gas prices have increased, but so has electricity. The energy crisis is hitting households as well (don't forget how smartworking and distance learning have also been having an impact on families as these activities make our electricity bills rise) and it is estimated that soaring natural gas and power prices will send bills rocketing: analysts state consumers will register a 54% increase in bills, but the soaring costs are having an impact at all levels.
Industrial consumers are facing extreme choices, especially those plants that deal with energy-intensive processes as the energy costs are forcing many manufacturers to reassess their production plans this winter.
A few companies in Italy saw their bills fluctuating towards one million euros: last October Brescia-based Btt Trattamenti Termici, manufacturing semi-finished steel products for the mechanical, automotive, oil & gas and construction industries, was hit by a gas bill that reached almost 900,000 EUR. When the company added the costs for electricity and compared the expenses to the monthly 1,9 million EUR turnover, it came to a very obvious conclusion - it was not worth staying open. Managers therefore accounced in December they were considering to stop production and put the workers on furlough as this solution seemed less expensive. In Sardinia, Portovesme srl, a company of the Glencore group, announced at the end of last year that it was stopping the zinc production plant (while other lines of production were continuing) and putting 400 workers on furlough for the same reasons.
For some of these companies this is a very frustrating situation as the decision to close their operations temporarily is not due to lack of orders or unstable financial situations, some of these companies hit indeed production records in the last few years with consistent and robust performances.
The rising energy prices will not just have an effect on steelwork, glasswork, agri-food and ceramic companies, but on all sorts of industries, fashion included. It is estimated that prices may see increases of 10-12% considering also soaring shipping and transport costs and the fact that many raw material costs are also rising (think about the food and drink industry and the impact the soaring cost of ingredients is having on consumer prices).
Consequences are easy to imagine: as the cost of living surges, consumers facing energy bill and essential commodities increases will have to reduce their expenses, and maybe start buying fewer yet better items compared to pre-pandemic levels, something that may mean that fast fashion will register some losses (that will maybe prompt fast fashion groups to decrease clothing production).
Reducing gas and electricity use and turning down thermostats may be temporary solutions, but the new increases brought the discussion on energy sources back on the table. As energy bills may be the obstacles to the efforts towards the economic recovery in Europe, it is important to find alternative energy solutions. While this is obviously something that takes time to do, it is important to work on this issue to avoid dire socio-economic consequences in the next few years.
Planning for the future may not be impossible, but consumers are finding increasingly difficult to deal with uncertainty and lack of security, especially in the constantly changing health situation we are all living in that is making us all wonder if Omicron is the final stage of SARS-CoV-2 or if something worse awaits us just around the corner.
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