Competitive energy sector
Are the Big Six losing their grip on the market?
Mains-supplied natural gas is an integral fuel to the UK’s energy mix. Approximately 80% of the UK’s households (and many businesses) are powered by it. The result is continued high demand, and a busy, competitive market for both domestic and commercial mains gas.
Who are the Big Six?
A handful of large suppliers take a lion’s share of the market (c.80-90%). These are known as the Big Six and consist of: British Gas, EDF, EON, Npower, SSE and Scottish Power.
In what ways is the energy market changing?
Things seem to be changing though and these Big Six ‘heavyweights’ maybe on the ropes.
Recent figures suggest their popularity may be on the wane among UK energy users. A record 163,000 customers were reported to have left the Big Six in favour of smaller suppliers in September 2017 alone.
It was maybe no coincidence either that British Gas hiked its electricity prices by 12.5% that same month. So far, it’s price rises like these that have helped the company and its five main competitors maintain healthy profit margins, even in spite of losing customers en masse.
The picture isn’t completely clear yet, and may take time to emerge. Although its profits may appear protected for now, the impact of the Big Six’s fall from grace is manifesting itself in a noticeable market shift: one that signals its monopoly could be set to shrink irreversibly. To contextualise, a huge 1.1 million customers switched away from the Big Six in the first three quarters of 2017 – up 18% on the same period the previous year. This trend is allowing smaller competitors to grow their market share to unprecedented levels.
If the power of the Big Six is diminishing, does that leave the door open for other competitors? If the ‘Big Six exodus’ continues at a similar rate throughout 2018 and beyond, established (and growing) small suppliers are likely to continue to tighten their grip on the market – along with new, dynamic challengers that are emerging all the time.
Is there a flipside?
Although 2017 has been a promising year for energy switching – a practice that has long been deemed the most effective way for customers to ensure they’re getting the best deal
– some experts have voiced concerns that newly proposed energy legislation could put paid this trend.
Prime Minister Theresa May has talked about a ‘broken market’ and once announced plans for a proposed cap on energy bills. Likely to take effect in late 2018 or early 2019, this could last for five years. Although it may sound like good news for consumers, research director Robert Buckley at energy expert Cornwall Insight is among those who have reservations.
Buckley is concerned that any price cap could potentially lull consumers into a false sense of security – making them think that it’s ‘safe’ to stick with their current supplier and creating a slowdown in the switching trend. “I think there’s a real risk with any price cap that people who haven’t engaged with the market think that they’ll be OK not to,” he explained.
However, several of the small suppliers themselves have welcomed the prospect of the cap, as their existing tariffs are already well below any upper limit likely to be set.
What do the other challengers offer?
So, is there anything to be gained for consumers (domestic and commercial) from testing the water with a smaller challenger firm
Flogas, for example, is a respected supplier with more than 30 years’ experience in the energy industry. As well as providing bespoke off-grid energy solutions, it specialises in gas mains for businesses too.
And the future?
It’s difficult to predict the future lay of the land for the energy market. Two things are for sure, though: firstly, consumers are starting to realise that their options aren’t limited to the Big Six, and secondly, smaller suppliers are responding with increasingly attractive alternative offerings.
This article is supplied under the terms of the DB Direct service