Utilities like water and electricity are basic necessities required for running a business. As such, it is essential that not only are these services reliable but also affordable. Fortunately, the UK utility market is privatized, which means that consumers are free to switch from one provider to another if they consider it offers them better value.
For a long time, the UK utility market was dominated by the big six. But the market is slowly shifting to give way to smaller providers. According to reports, the big six received their lowest share in 2017 at only 78% of the consumer market. There is no doubt that these smaller companies are proving to be effective in competing with large corporations.
Demand shift from the big six
Changing energy suppliers is standard practice, and at times encouraged, especially when a rival provider offers a lower tariff. Residential consumers can switch anytime they want, but the process is a little more complicated in the case of business consumers. Most companies that are looking for a better deal use services such as Utility Bidder to get a quote fast and complete the shift using a single online platform.
Shifting away from the big six did not happen gradually. It was quicker than most anticipated and started with residential consumers. Commercial consumers eventually followed suit. For example, retail company Marks & Spencer started to partner with Octopus Energy, one of more than 60 smaller suppliers that operate around the country.
The trend is likely going to continue in the coming years with the possibility of the big six dropping their collective control of the energy market to as little as 50% come 2020.
Why are smaller companies becoming significant competitors?
Among the primary drivers for the increased patronage of smaller suppliers is more competitive pricing. Both residential and commercial consumers are keen to look for ways to save money on their utility bills. Another thing that small companies are doing right is how they have more personalized services.
Consumers have had years of dissatisfaction with the big six, especially with their customer service. Smaller suppliers changed the game by not only improving on the weaknesses of the big six but also diversifying their services to cater to niche markets such as those looking for renewable energy or prepaid energy.
Continuing change in the UK energy market
Because of these smaller suppliers, the UK energy market is now changing from a conventional model to a competitive market. Suppliers are also getting pressured by regulatory changes and the ongoing intervention of the government for suppliers to implement a price cap. Renewable energy is another trend that is shaping the market. Smaller power plants have become more common as a result, which in turn bypasses the ordinary transmission network.
But despite all these changes, there are still many consumers paying overpriced energy tariffs. Indeed, the growing competition brought by smaller suppliers, and the pressure coming from the government to put price caps will eventually make the competition in the market more favorable to all consumers.