The situation has escalated to the point that on Wednesday they will “release” the smaller of the two glass furnaces they have in Úsobrno in Blanensko. This term in the glass industry means the end of production.
“We are trying to keep the larger furnace in operation as long as possible with production orders. According to the current outlook, we could operate until at least the end of October. So we gained some time for the reaction of the market or the government,” gives Bondy’s outlook.
Engineering companies are also feeling the harsh effects. Technologies for production in Brno’s Královopolská are very energy-intensive, which is why they have to resort to radical cost-saving measures here, despite possible state aid.
“And that, for example, by partially limiting production, and thus also reducing jobs, or by leaving people at home for 60 percent of their wages,” outlined director Hana Halasová.
The problem is mainly the length of the implementation of individual orders, which in Královopolská ranges from half a year to a year. “Furthermore, it is impossible to estimate the further development of energy prices and thereby quantify the company’s possible losses,” he adds.
Another example? The Kuřim foundry used to buy electricity for the whole year in October. This year, no supplier gave her such an offer, so she had to switch to spot purchases, which means immediate delivery of energy on a set day.
“No one knows what they will buy for”
“The price will thus change every month, regardless of the amount agreed on the date of the order. As a result, no one knows what they will buy for,” explains sales director Peter Olžbut, adding that this currently increases the selling price by up to 40 percent.
He considers production restrictions and layoffs as a last resort causing a domino effect – as primary producers, they would stop a whole range of industries that depend on their supplies.
Companies in the metalworking and steel industries, bakeries and laundries also have problems.
“Companies try to save as much as possible, but they are operations with zero energy savings, because without these inputs, the technological foundations on which the production is based cannot be achieved,” explains the chairman of the Association of Small and Medium Enterprises and Entrepreneurs, Josef Jaroš.
In addition, if someone paid a million per month for energy and now it is five times, it is difficult to solve it by raising the price of the product. “The more its price rises, the more purchasing power will fall, as customers will reconsider these investments or buy them elsewhere,” he adds.
According to the association, up to 30 percent of smaller businesses will not survive the winter, which they have been pointing out since February. “We know that not everyone can handle the crisis, that is unfortunately the reality of business. But without direct government help, the number will be dramatically higher than it should be,” Jaroš warns.
Solution? “Ceiling the Prices”
Even according to Tomáš Psota, director of the Regional Chamber of Commerce of South Moravia, state intervention is necessary. Capping energy prices at the pan-European level is ideal, but a national plan must also be prepared in advance.
“In addition to the loss of competitiveness of companies, there is a threat of massive redundancies. The current survey among employers revealed that under the current conditions, a fifth of companies will reduce their staff by the end of this year. In energy-intensive industries, it is likely that production will be reduced or stopped,” summarizes Psota.
Addressed entrepreneurs would also welcome repayment of energy prices, loan guarantees from banks and, in the worst case, short-term work, when incapacity for work is compensated by the state.
A large number of politicians in the region also demand a cap on energy prices for entrepreneurs. Governors, including South Moravian Jan Grolich (KDU-ČSL), suggest that the measure could vary according to the area of business or importance for the state. Brno mayor Markéta Vaňková (ODS) is also interceding for the support of energy-intensive operations.
However, as Alena Šafrová Drášilová from the Department of Business Administration of Masaryk University warns, no state intervention will work immediately, we have to learn to live with higher energy prices anyway.
“After all, we already experienced the effect of widespread direct support during the covid pandemic – huge costs that the state budget cannot afford, problematic administration, lack of targeting, legislative complications. Solutions that really help always take time. These include, in particular, a radical change in the permit system, diversification of energy sources at the level of the European Union and support for investments in energy savings,” he notes.
Other energy impacts in the South Moravian region
Schools: Brno will provide almost 54 million crowns to schools and kindergartens. Universities are considering a winter transition to distance learning, which would save around 10 percent on energy costs.
Dining rooms: Higher purchase prices of food made lunches in school canteens in the region more expensive by approximately 15 percent, so pupils and students pay an extra 100 to 200 crowns a month. The Brno BUT has also increased the price, the average amount will rise from 60 to 65 crowns for one lunch.
Rings: Leisure activities for children in Brno have become more expensive by about ten percent. Leisure centers will receive more than a million crowns from the city for higher energy prices.
HOSPITAL: For example, the Brno University Hospital expects to pay 195 million crowns more this year than last year due to the rapid increase in energy prices. Its electricity costs rose by roughly 92 percent, and gas costs by as much as 156 percent.