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Small energy suppliers get a boost as their rivals go bust

Eleanor Newis
Jan 29, 2019


Surviving small firms grow to almost big six sizes.

Eight small energy suppliers went bust last year due to rising wholesale costs of energy, and this trend is now continuing into 2019, with the recent collapse of Economy Energy, followed by that of Our Power.

This string of disasters has thrown light on the way that many small energy firms set their prices unsustainably low. This means that they are likely to run out of money quickly.

A much less remarked upon result of this, however, is the impact it is having on the energy market and specifically the smaller companies that survive.

Suppliers who have been chosen by Ofgem to taken on more than 800,000 of displaced customers have seen a huge boost to their growth, and this means they now pose a serious economic threat to the big six.

Bodies such as the regulator Ofgem and the trade group Energy UK have applauded the new entrants to the energy market, saying that the increasing competition is a good thing. The number of energy provider’s in the UK even reached 70 at one point.

Now that some have collapsed, a few smaller challenger firms are coming close to rivalling the big six in terms of customer numbers. The firms closest to doing this are Ovo Energy, First Utility and Bulb.

Ovo Energy has boldly taken on half a million customers from the various failed companies, and racked up a total of 1.5 million consumers, meaning a market share of 4.9%. This puts it within a hair’s breadth of npower, which has a 7.7% market share.

The firm said that it would also consider taking more customers if more firms fail.

Ovo Energy’s chief executive, Stephen Fitzpatrick, said: ‘Taking on Economy Energy and Spark Energy customers has been significant for us - an increase of more than 500,000 customers - but we are prepared for more if the right opportunities arise.

‘What the last few months have shown is that it’s not just about getting big fast. We’ve already seen some of the larger independent energy companies fail - the market is going through major change and many companies, big and small, are struggling to adapt.’

In contrast, Bulb hasn’t taken on any extra customers from failed providers, but has simply grown fast since it’s launch in 2015. The company added 700,000 customers last year, and has a market share of 3.1%.

First Utility is the third-biggest challenger. The launched in 2008 with 760,000 customers and have actually got rid of tens of thousands of customers since being bought by Shell in 2017. The oil giant has said that it wants the company to ‘grow significantly’ however. 

This rise in challenger firms could be good news for consumers, as it will mean more competition in the energy market. However, in the meantime you can make sure you find the best energy deal by using a price comparison website like A Spokesman Said to shop around. Don’t just pick the first tariff you see, make sure it’s right for you.

 

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