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The provisional findings of a comprehensive year-long investigation of the energy market will make very interesting reading for UK small to medium sized businesses.
Divided between two lengthy reports that examined the energy market for both domestic consumers and small to medium sized businesses, the Competition and Markets Authority (CMA) found “considerable variation in the prices” paid by SMEs, including microbusinesses. It estimated that fairer competition could save UK SME customers £500 million a year, although it added that this “may be an underestimate of the extent to which prices have been above competitive levels”.
The CMA found that much of the problem stems from businesses not being engaged in choosing their energy contracts, an observation that will come as little surprise to overworked owner-managers.
There were “positive signs of a recent increase in switching between suppliers” but this came with concerns “many microbusinesses appear to show limited engagement and that they have limited interest in their ability to switch energy supplier”. Strikingly, a massive 45% of microbusinesses were on default electricity tariffs (i.e. placed on a tariff that had not been actively negotiated) in 2013.
Unnecessary overpayment was particularly marked with rollover tariffs (tariffs that customers would pay if they took no action at the end of an existing fixed-term contract), retention tariffs (tariffs that customers actively renegotiate with their existing supplier at the end of an existing contract), and deemed tariffs (a tariff paid until a customer, typically in new premises, contacts its supplier to enter into its first contract).
The CMA report points to a lack of transparency. Roger Witcomb, Chairman of the energy market investigation, said: “The confusing way energy is measured and billed can make comparing deals understandably daunting.”
Third Party Intermediaries (TPIs) were highlighted as a potential help to business customers. However, the actions of some less scrupulous organisations have led to a number of complaints to official bodies (although SwitchMyBusiness.com, as the highest rated business energy compare and switch provider on Trustpilot, is not included in this rogues gallery).
Despite these complaints, the CMA expressed “concerns that the less engaged customers on these tariffs are not exerting sufficient competitive constraints on energy suppliers”, highlighting the potential to be shunted into default tariffs (auto-rollovers and replacement contracts), or if they are receiving energy supply in circumstances where they have not agreed a contract (deemed and out of contract tariffs).
This weak customer response, especially from microbusinesses, amounts to an adverse effect on competition, giving suppliers “a position of unilateral market power concerning their inactive microbusiness customer base which they are able to exploit through their pricing policies”.
The findings of the report are long overdue, according to SwitchMyBusiness.com CEO Ivan McKeever. “UK small and medium sized businesses have been the forgotten sibling of corporates and consumers for too long. As SME specialists we understand that smaller businesses lack the time to compare business energy tariffs and switch suppliers. We back the CMA’s report and hope that its recommendations are put into action in a timely fashion.”
Among the CMA’s recommendations are measures to reduce barriers to information in the SME energy markets and prohibiting the auto-rollover of microbusinesses. The latter point is something that SwitchMyBusiness.com has previously campaigned for and is currently researching.
In the meantime, businesses can get a no-fuss, no-obligation price comparison and switch suppliers in just 20 minutes. Our service is focused on small to medium sized businesses and we always strive for clear, reliable service. Give us a call on 0330 0100 251 or fill in the form on the top right of this page to find out why we are the top rated switch provider.
"Very easy. Bea Luseni very efficient & knowledgeable."This review was posted by Alan Duffy on the 31st of March 2017
Super helpful and easy to work with
"Recommend this company in a heartbeat - Nicole Borneuf was super easy to talk to, was not pushy in the slightest, very helpful and replied with all my questions very professionally and did all she could to help. I had to deal with a few companies to sort my business energy out, all but Nicole were too pushy for my liking and I refused to follow through with them. Thank Nicole - you are a credit to your company, thank you for making the stressful energy change so easy."This review was posted by Mia Drew on the 29th of March 2017
An Extremely Competent Company
"Switch my business has not only helped my SME secure a good energy deal for the second year running but Jessica swiftly found a alternative supplier for me when I was let down on the day of switching by the new contractual provider I had chosen some 4 months previously. Being suddenly out of contract and without provider is everyone's energy nightmare. Greatest thanks."This review was posted by S McMillan on the 29th of March 2017
Helpful, friendly and we saved lots of money!
"Jessica Purnell was helpful and friendly, she made the whole process easy and simple AND we saved lots of money thanks Jess"This review was posted by Melanie Baker on the 23rd of March 2017
Quick & Easy
"Kabibi was very helpful and the whole process was very efficient. The one small reservation I had was that I was phoned up by Kabibi almost immediately having received my online quote - which wasn't enough time for me to finish reading the quotes! Fortunately she was able to assist me in a greater savings on both Gas & Electricity, and so as long as the switchover is seamless I will remain very happy with the service."This review was posted by Amanda Brown on the 21st of March 2017