UK Energy supply market undergoing a period of consolidation says new report
A new report commissioned by law firm Shoosmiths and produced by Cornwall Insight has revealed the scale of consolidation occurring in the UK energy supply market. We take a look at some of the report’s key findings.
Energy Suppliers need to adapt or perish
Business models are changing, consumer appetites are shifting, and energy suppliers need to be adaptable to survive.
Since the UK energy supply market was opened up to increase competition the number of suppliers has varied over the years. Back in 2018, the market had 62 different companies all battling to attract customers, now in 2021, that number has fallen to below 50.
Numerous challenges have arisen just in the past few years alone. The unprecedented Covid-19 pandemic forced suppliers to make huge changes to how they operate and those that have failed to adapt have suffered or been forced to exit the market.
Record high wholesale energy prices is the current major challenge especially for smaller challenger suppliers who rely on offering cheaper energy tariffs than their competitors. The surge in gas and electricity prices means that offering lower-priced deals is no longer as viable as it once was.
Also read: What are the Digital Tools an Energy Supplier should use to attract more customers?
A supplier must differentiate on more than price
One of the reports key findings is that those energy suppliers that focus solely on prices will fall behind those that seek to engage their customers on a broader service platform.
Online services have become increasingly important and those suppliers that embrace digitalisation will perform better than those that do not.
“The UK energy retail market is undergoing significant restructuring, and with the current landscape of rising energy costs and looming supply payment deadlines, there is a real possibility of further supplier exits later this year.
“There is a changing of the guard occurring in the supplier market, and for those that remain in the sector, it is critical to differentiate on more than just price. In particular, those who engage and empower consumers through technology are likely to thrive. Therefore, suppliers who make this transition early to support a high-quality consumer engagement and reach net-zero targets will benefit.
“However, this will require significant financial support, and those who are unable to secure this or diversify enough will be unlikely to remain in the market,” said Emma Bill, Lead Research Analyst at Cornwall Insight.
Digital innovation including automation via CRM systems will enable suppliers to focus their resources elsewhere, free up staff time and support back-office processes which are traditionally a drain on both time and morale for call centre staff.
The rise of the Prosumer
Another key point raised by the report was the increasing number of what are termed ‘prosumers’ households that generate and sell back energy to the grid.
As the UK energy system adapts and changes in the coming years to achieve the governments NetZero targets, energy suppliers will need to be ready for an increase in prosumers.
Prosumers will become increasingly important as reliance on the energy system for heating and transport (Evs) adds demand for more electricity.
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Further Reading
Dyball Associates are proud to help new supply businesses successfully launch in the UK market.
Through our energy market consultancy services, and the software we’ve developed, we’re supporting new UK electricity and gas suppliers to get set up and start supplying.
For more information on how to start and manage an energy company, get in touch with Dyball Associates today.
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