by leslieThe return of switching
After a long period of stagnation, consumers are starting to switch energy suppliers again. But what does that mean when you look behind the headlines?
The latest Electralink figures are out – and it’s positive news for energy market observers. The number of people switching energy suppliers is at its highest level since 2021, when switching all but disappeared. However, when you dig deeper into the numbers, you see that the marketplace may not be working as well as you might think, with consumers reluctant to switch to new, smaller entrants.
In this article, we’ll examine Electralink’s numbers more closely. We’ll discuss who’s up and who’s down and explore what it means for the energy marketplace in the UK. Let’s get started.
Larger players cleaning up
In March 2024, 224,000 households switched their energy supplier. This number is 4% up from the previous month and 28% up from March 2023. It’s common for consumers to switch at this time of year if they’re going to at all. This is because March and April are when fixed tariffs end, and Ofgem changes its price cap.
However, 135,000 of those switches – that’s 60% – were people leaving large suppliers and going to other large suppliers. A further 29,000 (13% of total switches) were people leaving small suppliers in favour of larger ones. This indicates that consumers no longer want to trust smaller energy brands with their custom, mainly because so many went out of business during the 2021 energy crisis. It is understandable, as consumers do not want the stress of their suppliers going bust again (even if they would not lose their power supply due to existing contingency plans). However, it’s not really how the energy marketplace was intended to work.
Ofgem has taken steps to make switching easier, including reducing the time that suppliers can wait before they have to compensate consumers for poor service and updating Guaranteed Standards of Performance (GSoP). While the latest switching figures are high, they’re still much lower than they were before the recent energy crisis, when 5 million households were switching every year.
The Octopus success story
The latest figures made excellent reading for Octopus Energy. The company overtook British Gas to become the UK’s largest energy supplier. Octopus only entered the marketplace in 2016, so it’s clearly a massive achievement.
Octopus currently has 6.8 million electricity customers, which is 22% of total households in the UK. Its customer numbers rose by 1.9 million over the last year, making it the only large energy supplier to grow its market share. It achieved this lofty position in the market in three ways:
- Acquiring Shell Energy Retailing in late 2023, taking on their 1.3 million customers
- Migrating 1.5 million customers from Bulb when it went bust in 2023
- Winning 800,00 new customers via switching
However, Octopus does not plan to stop growing its market share, even though it’s now number one. Shareholders recently invested £295 million back into the company, taking its value to £7.2 billion, a 15% rise since the start of 2024. It has also received investment from pension funds in the US, Canada, and Australia.
The company plans to use the investment to grow its business in the US through its Kraken technological platform.
Other suppliers that saw good figures this round include British Gas, which maintained its position as the UK’s largest gas supplier with a 27.8% market share, and Utility Warehouse, which has grown to become the country’s seventh-largest energy supplier.
Looking to the future
While it’s great that more consumers are discovering they can save money by switching suppliers again, it’s concerning that they’re mainly moving from one giant to another. It’s a huge uphill task for smaller suppliers to win business against these established names, especially when some new entrants gave small suppliers a bad reputation back in 2021.
However, the success of Octopus has shown that when you get it right, you can establish yourself as a new supplier and join the giants yourself. It would be great if a new group of innovative, greener suppliers could find similar success.
