The Authority to Compete?

With the final CMA findings being published last week, and PWC claiming there may be a legal case for the lack of change from the provisional report, we explore what’s at the crux of the CMA findings – a lack of competition and a lack of customer engagement.

It’s fair to say that even taking into account the timing of the report – released on the day of what’s turned out to be a divisive EU referendum result – the responses to the CMA’s findings have been muted. At a cost of £5m to the taxpayer, the CMA has faced some significant criticism, with most commentators agreeing that the remedies proposed lack teeth, and don’t address root causes.

One key theme that does come through in the report is the issue, and distinct lack, of customer engagement. The report includes some telling figures;

• 56% surveyed had never switched supplier
• 34% surveyed had never even considered switching
• 70% of Big 6 customers are on a default Standard Variable Tariff product
• Of that 70% on an SVT tariff, £330 per annum per customer could have been saved by switching

Whichever way you cut it, there’s no denying that customers aren’t actively engaged in the energy market. Something that’s not highlighted in the report but is equally telling is the indifference in switching behaviour when comparing the big 6 to the independents. When you drill down into the switching data, it’s clear that just as many move from Big 6 to Big 6 as move from Big 6 to independent (see below graph from EnergyUK)

When you take this independent indifference into account, you start to get a better idea of what’s really causing the lack of engagement. If there’s no clear differentiation between the big 6 and the independents, then in the minds of customers there is no compelling reason to switch other than price. If we are to avoid a ‘race to the bottom’ from a price perspective, then new and established suppliers alike need to focus on making their propositions distinct, attractive and accessible to potential customers.

Increased ‘competition’ will only truly be valuable to customers once there are some clearly differentiated offers for them to choose from. Price is one variable but current inertia demonstrates it is not the only one and certainly not a compelling enough reason for many customers out there.

If you think you’ve got a compelling and unique proposition and want to disrupt the market, get in touch today to see how we can help.