The acquisition of customers from failing suppliers has allowed some so-called “challenger” brands to achieve massive growth since the beginning of 2018 – putting them on course to rival the big six – according to new analysis from consultancy Cornwall Insights.
Most notably, Ovo Energy has expanded its market share by 57 per cent to around 2.5 million accounts following its recent appointments as supplier of last resort (SoLR) for roughly half a million customers previously served by Spark Energy and Economy Energy.
Co-operative Energy has grown its market share by 40 per cent through its purchase of Flow Energy, whilst Octopus Energy has seen a 35 per cent increase after being selected by Ofgem to take on Iresa’s customers.
Cornwall Insights said companies like Ovo Energy are rapidly closing the gap between themselves and the big six. Scottish Power – the smallest of the incumbents in terms of market share – currently has less than five million gas and electricity accounts.
Source: Cornwall Insights. Figures from Ofgem and media reports.
“Ovo Energy’s acquisitions have shown how suppliers that got through market entry several years ago and have been operating in this market for a while are leading the charge on consolidation and growth,” said Robert Buckley, head of retail at Cornwall.
“Many observers may have naturally assumed that the customers of failed suppliers would have transferred back to the big six. However, the bigger players have been involved in just one SoLR transaction.”
Despite the negative press over the “fragile business models” of failing suppliers, Buckley said there are “no signs that these exits have caused any real degradation to competition in the retail market”.
“The shake-up has presented an opportunity for several suppliers to grow, changing the face of the retail landscape in the process,” he added.
However, Buckley said the eight market exits conducted under the SoLR process since the start of 2018 could end up costing households around £2.50 each: “On top of this will be the costs under the expected Renewables Obligation and feed-in-tariff mutualisation processes, likely to total many tens of millions of pounds.
“These are issues Ofgem will consider in its supplier licensing review.”