New CMA Report: Small Business Can Save Money by Switching Energy Suppliers

The Competition and Markets Authority (CMA) has released a report claiming that energy customers – including small and medium sized businesses, as well as microbusinesses – can save money by switching energy suppliers.

Recently, we reported that Government energy ministers were preparing to launch a fresh ‘energy-switch campaign’ and this latest report appears to represent Government redoubling against the naïve loyalty that ‘sticky’ energy customers show to their suppliers.

In its capacity as the UK’s primary competition and consumer authority, the CMA has been investigating the energy market since last summer. The headline announcement in the ‘updated issues statement’ reported that 95% of dual-fuel customer who held contracts with the largest energy suppliers would have saved money by switching suppliers between 2012 and 2014. But domestic customers are not the only ones losing out.

Non-domestic SME and microbusiness market

Large sections of the investigation were aimed at the retail supply of energy to non-domestic customers, particularly SMEs and microbusinesses. For the investigation period, the CMA reports that gas prices to SMEs rose by 11%. This was lower than the price-hike experienced by domestic consumers (27%); however, it is clear that suppliers are squeezing non-domestics for higher profit. EBIT margins for the SME sector were on average 8.6% compared to 3.3% for domestic consumers. Significantly for gas-buyers, the margin applied to gas prices was 2% higher than the margin for electricity.

Worryingly for ‘less engaged’ or smaller businesses, the report found that there were significant price variations depending on the contract type. Rollover gas contracts were, on average, 28% higher than retention contracts – and even more significantly – ‘deemed’ gas contracts were 24% higher than rollovers. For under-resourced microbusinesses this is particularly problematic. A massive 9% of microbusinesses were on deemed contracts as well as a further 23% on rollover contracts in 2013.

Small businesses losing out in the gas market

In cooperation with third parties including; Ofgem, The Federation of Small Businesses and Citizens Advice the CMA expressed three other concerns faced by business energy buyers:

• Microbusinesses may face barriers to engaging in retail energy markets – similar to those faced by domestic customers
• With negotiated contracts and lack of price publication – the non-doemstic market is non-transparent
• Energy brokers may not be operating effectively or fairly

Overall, this report suggests that it is the smallest businesses who suffer the most in the current energy market. Their size makes them unable to leverage the largest suppliers for better prices, and cowboy brokers are unwilling to locate them a fair contract. On top of this, their relative lack of resources means that many small businesses struggle to manage energy contracts and often, they get stuck on a rollover contract at a much higher rate.

Business Gas.com specialise in offering favourable rates to smaller businesses. Our fixed and flexible priced contracts are perfect for small operations – and our gas buying group allows smaller businesses to band together in order to gain more leverage over the energy market.