Friday, 24 September 2021

The collapse of Avro Energy and the absolute scam that is energy sector privatisation



So far in September seven energy suppliers have already gone bust, and the industry is warning that the energy crisis could reduce the remaining field from 53 to an oligopoly of just 10 gigantic "too big to fail" energy supply behemoths.

In this article I'm going to take a look at one of the companies which collapsed into insolvency this month; Avro Energy.

Avro Energy is the biggest energy supply company to have collapsed so far, with 580,000 customers, which represented a significant 2% market share.

The company had been registered at a small business unit on Eliot Business Park in Nuneaton and run by a father and son team Jake and Andrew Brown.

The much-repeated origin myth for the company is that Jake Brown had to give up a promising career as a footballer due to injury, so he decided to found a massive energy supply company with a turnover of hundreds of millions of pounds, like you do.

Avro Energy managed to undercut other players in the energy market, which won them a coveted U-Switch recommendation in 2018. This U-Switch endorsement resulted in an astounding 144% increase in customers in the space of a single financial year, a fact that the company bragged about in its most recently filed accounts before they went insolvent.

Avro Energy's most recent accounts showed a turnover of almost £390 million, and they certainly make interesting reading (especially page 21).

The company provided a whopping £830,000 in unsecured loans to a construction company called Berkeley Swiss Ltd, which is registered at a small unit on Eliot Business Park in Nuneaton by a father and son team called Jake and Andrew Brown!

Another interesting payment in their most recent accounts is a £2.25 million management fee to a company called Sendito Marketing, which is registered at the same unit, on the same business park, and run by the same father and son team!

A look at the accounts for Sendito Marketing at the time of the £2.25 million management fee show that it only had tangible assets of £111, and just three employees, two of them being the directors Jake and Andrew Brown.

It makes you wonder what kind of management service could be provided by a company with just three employees and assets worth £111, that's worth £2.25 million doesn't it?

So what was it that Jake and Andrew Brown were doing that warranted a billing their own company for over two million quid?

More recent accounts for Sendito Marketing show that it's reduced its workforce to 0 the following year, and that the directors have been using it as a kind of personal slush fund, with hundreds of thousands of pounds worth of advances and repayments between the empty shell company and its two directors.

I'm no corporate accountant, so I can't tell you if any of this is unlawful, but there's no doubt whatever that it's dodgy as hell for directors to transfer literally £millions out of their own company in unsecured loans and mysterious "management fees" to other companies which they also own.

Who knows how many millions the Browns extracted from Avro Energy through the years, in bloated executive salaries, shareholder dividends, dodgy unsecured loans, and even dodgier "management fees"?

All we can say for sure is that this massive scale of wealth-extraction was enabled by the ideological madness of energy sector privatisation.

Lack of scrutiny

It's only since this company went bust that anyone in the corporate media has paid the slightest attention to the dodgy financial arrangements of the Avro Energy directors.

Up until just months ago, pretty much everything that was written about them outside of specialised energy market journals looked more like a corporate puff piece than any kind of real journalism. The heart-warming origin story, the relentless rise, the amazing entrepreneurship, the value for money ...

Did U-Switch do any kind of investigation into exactly how Avro Energy prices were so low before they convinced hundreds of thousands of people to switch over to them?

How on earth was the U-Switch website still recommending Avro Energy as a Five Star company, and exceptional value for money, right up until the moment the company went insolvent?

What were the energy market regulator Ofgem doing when the directors of this company were transferring literally £millions out of it, into a network of other companies that they owned?

Presumably it's standard practice for energy market companies with hundreds of thousands of customers and hundreds of £millions in turnover to be registered at a tiny industrial unit that's somehow home to 81 other companies, including several that are owned by the same directors?

Did the local Tory government bother to do any due diligence before they ran a blatant puff piece like this about these energy sector profiteers?

Privatisation

The majority of British people believe that the energy sector should be run as a publicly owned not-for-profit public service, but the politicians in Westminster prefer to leave it in the hands of private sector profiteers, and there are clearly very few rules governing the conduct of private operators in the shambolic privatised free-for-all that is the UK energy market.

It's not just that the energy supplies of literally hundreds of thousands of people have fallen into the hands of unscrupulous operators like the Browns, it's the deliberate running down of the nation's energy infrastructure because it's more profitable for the private owners to neglect it and then shut it down, than it is to keep it properly maintained.

And then there's the way that the governments of foreign states like France and China have come in and bought out £billions worth of privatised UK energy assets.

The Conservatives conducted the mass sell-off of British energy infrastructure by assuring the British people that the private sector would run things better than the British state, but then they've done nothing when France and China have come along to take control of these British energy assets for themselves!

The depraved mentality in Westminster politics is that the British state is incapable of running vital energy infrastructure for the benefit of the British people, but that the governments of France and China should be allowed to run it, in order to extract wealth out of British consumers to fund improvements to their own energy infrastructure overseas!

It's a bizarre self-hating ideology that borders on treason, but the Westminster establishment class are so strongly committed to it, and so vehemently opposed to proper public ownership, that they savagely hounded Jeremy Corbyn out of frontline politics for daring to offer the British public renationalisation.
  • It makes absolute economic sense to run energy and other vital national resources as public not-for-profit public services, rather than letting a chaotic mix of private profiteers and foreign governments run our energy infrastructure as a wealth extraction scam on British energy users.
  • Running the energy sector as a national enterprise would help to prevent dodgy private profiteers like the Browns from using it as their own personal cash machine.

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7 comments:

Merv said...
This comment has been removed by the author.
Terminator said...

This was my energy provider. and the fact that they are giving payment of hundreds of thousands or millions to companies owned by them should see them in court on charges as the auditors will require the repayment of these sums to Avro.
Will these companies file for bankruptcy to stop paying Avro?

Anonymous said...

The links don't work, I'd like to read them.

Barbara Iqbal said...

Thanks for doing this work, is there a body that the information you've unearthed can be sent to for investigtion? I hpe so.

Mr. Magoo said...

All we can say for sure is that this massive scale of wealth-extraction was enabled by the ideological madness of producing to accumulate capital rather than to meet people's needs (i.e. capitalism).

Nationalised industries produce for profit. Profit comes from paying workers less than the wealth they produce. Are you suggesting we should have free energy like we have free health care? (I doubt it)

You've fallen into the trap all left-wingers fall into, that WE are the State. Workers have no state. States exist to protect the wealth of the parasite class, and sometimes become parasites themselves - through nationalisation.

While I agree that some industries are run better when owned by the State, and others when owned by private enterprises, both are terrible compared to real socialism. Real socialism means a stateless; classless; leaderless; moneyless global society. Put positively, real socialism means common ownership & democratic control of the Earth's natural & industrial resources to produce solely to meet people's needs in harmony with nature. Under this new system, people will contribute whatever they want to society & take whatever they want from society (or as Karl Marx put it: "From each according to abilities to each according to needs").

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