Is the reign of the Big Six coming to an end?
Mains-supplied natural gas is the go-to source for around 80% of UK households, as well as numerous businesses. The domestic and commercial mains gas market is a lucrative business, and a prime location for competition from independent suppliers. With this rise in competition, are the Big Six at risk of losing their grip on the market?
Who are the Big Six?
The Big Six refers to the company giants who previously owned up to 90% of the energy market: Scottish Power, British Gas, EDF, SSE, Npower, and EON.
What is pulling the market away from them?
Recent studies show that a record 163,000 customers left the Big Six to switch to smaller suppliers in September 2017, suggesting that the Big Six are losing their popularity in the UK.
This switch occurred around the time that British Gas increased its electricity prices by 12.5%.. 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.
Even with its profits protected for the time being, the trend of customers leaving the Big Six signals a potentially permanent shift in the market. 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 this pattern continues through 2018, small suppliers are likely to continue to grow and establish a grip of their own, with new competition appearing too.
Is there a downside?
There are other factors to be aware of. 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.
New plans to place an energy cap on prices from Prime Minister Theresa May are intended to repair a ‘broken market’. 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 reckons a price cap could cause customers to believe that they are better off staying with their current supplier, rather than looking for a better deal. “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.
But the smaller suppliers do not seem as concerned as Buckley; many have welcomed the cap, as their tariffs are already far below any maximum cap likely to be seen.
What do the smaller suppliers have on offer?
If you’re thinking of moving away from the Big Six to scout better deals, smaller suppliers can offer more than just savings. For example, Flogas Britain, has more than 30 years’ experience in the energy industry and offers competitive commercial gas prices.
Where is the market heading from here?
It’s difficult to predict the energy market’s path, with so many different facets involved in its movements. 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.