Customer numbers fell by 2.7 per cent over the last six months to 21.8 million. They were down by 3.2 per cent on the same time last year, according to half year results released this morning (28 June).
“We had a really low level of customer losses in the second half of last year and a really high level of losses in the first half of this year, so they vary from period to period,” said chief executive Iain Conn. “They do matter; I mean clearly they matter. But we’re not obsessed by them.”
“It is a highly competitive market and we have got a very large market share”, he said, “and there are 44 energy suppliers in the UK now…
“Inevitably there’s a lot of competitive pressure which is why we’re responding very strongly in efficiency and the way we serve customers. Looking forward post the CMA decision we’re now in a place where we can innovate, giving customers something other than just a commodities relationship with us.”
Among the CMA’s final remedies was an end to the four tariff limit which was introduced following Ofgem’s Retail Market Review. About a month ago British Gas unveiled a new tariff for smart meter customers which offers them free power on one day each weekend. Conn said “customers love it”.
The man who headed up the CMA investigation, Roger Witcomb, recently said he did not believe the profits made by the big six are justified. He made reference to the CMA’s calculation of an EBIT (earnings before interest and taxation) margin of 1.25 per cent as an appropriate profit level for energy retailers.
Asked whether he thought that was an appropriate margin, Conn responded: “Although people will have opinions about unit margins, there’s no point in picking a number unless you’re going to price regulate, which they’re clearly decided they’re not going to do.
“Actually what they’re going to do is focus on promoting competition. Our margins will ultimately be set by what customers are prepared to pay and our own efficiency.”
As a comparison, he said other businesses regularly end up with pre-tax margins of 10 per cent, and that high street retailers typically make 20 per cent margins on sales. “I think it’s perfectly normal”, he added. “All we’re saying is the outcome will be what it will be.”
Conn said falls in wholesale gas and power prices had been passed on customers. He drew attention to the company’s post-tax margins per customer over the last five years, which he said had remained consistent, ranging between £42 and £65: “I don’t think that it’s likely we’ll see anything different to that this year.”