PwC warns energy utility firms over rising levels of bad debt
Energy utilities companies have been slapped with a stark warning over the impact of rising levels of bad debt.
Bad debt across the sector rose by 44 per cent to £640m over the last five years, according to an analysis by consulting giant PwC. Water firms also experienced a similar trend as bad debt swelled 44 per cent to £379m.
The telecoms sector showed a small improvement with bad debt levels dropping by £20m during this period. But if the average number of days they took to collect revenue after a sale are accounted for, it too saw a drop in performance levels.
This comes against a backdrop of rising household debt — unsecured lending is expected to hit record levels of £10,000 per household this year. This is due to increasing house prices, static wages and a real decline in household income.
“With pressure on household incomes steadily increasingly, the likelihood is that utilities will continue to experience further deterioration in their day sales outstanding and bad debt levels," Stephen Tebbett, director in PwC’s working capital team, specialising in utilities and industries, said.
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"The impact could also spread to other areas, for example, with numbers of customers on prepayment meters and use of vulnerable tariffs escalating."
"If firms are to successfully tackle this bad debt challenge, it’s crucial that they invest in a high tech and tailored approach to collections – a move that will not only reap much better returns, but strengthen customer relationships and boost stakeholder trust."