Small tech firms that automatically switch consumers to the cheapest deal are threatening the dominance of the UK’s biggest energy suppliers, mainly because the “Big Six” have most consumers on the most expensive default tariff.
According to research into the energy market by the Competition and Markets Authority (CMA), a record 5.5 million customers switched electricity supplier last year in a bid to get a better deal.
Until now, price comparison websites have provided the easiest way for consumers to compare different tariffs. However, start-ups like Labrador Ltd and Look After My Bills Ltd have now taken it a step further, as they move clients to the best tariff automatically.
The CMA said that 70 per cent of customers of the largest energy suppliers were on the most expensive default tariff and could save £300 a year if they switched. In fact, the findings led Prime Minister Theresa May to introduce a price cap on those contracts.
The Big Six are under a lot of pressure currently, having seen their combined share of the electricity market drop to 78 per cent in the first quarter of this year from 100 per cent only seven years ago.
However, they are fighting back against the small firms snapping at their heels, with SSE Plc getting approval recently to merge its retail arm with Innogy SE’s Npower to create the UK’s second biggest power and gas supplier.
Meanwhile, Centrica, the UK’s largest power supplier says it is already committed to making switching faster and easier.
However, the number of smaller suppliers has increased to more than 70 in recent years and this has been encouraged by the lack of public trust in big suppliers and the agility of the start-up model.