State of the market 2019-20: Review of the third year of the business retail water market

Following the opening of the business water retail market in England in April 2017, around 1.2 million business customers have been able to choose their water services retailer.

This is our third report on developments in the business retail market, covering the third year of its operation (April 2019 – March 2020). It updates our first and second reports – Open for business July 2018 and State of Market Report 2018/19 July 2019. This year we have presented findings using an interactive report format however.

To view the below report in full screen so it’s clearer to read, click the little double-ended arrow at the bottom right-hand side of the Power BI window.

 

 

You can also download a copy of the State of the Market 2019-20 report.

Headline findings

The third year of the market has seen customers who are active, in particular those who have switched or re-negotiated new deals, continue to benefit from competition.

However benefits, in terms of money, water and time saved, have tended to accrue more strongly to larger, higher consumption customers; in part because they are also more likely to be aware of the market and to be active. Many smaller customers, who continue to be less aware of and less active in the market, remain protected by our updated price and non-price protections that came into effect in April 2020.

  • Awareness levels have increased – 58% of eligible business customers are now aware that they have a choice or retailer, up from 53% in 2018/19. Almost all (96%) large customers are now aware of this.
  • Customer activity levels have been broadly steady – Just under 8% of eligible customers were active in the last 12 months rising to 16% of larger SME customers (50-249 employees) and 26% of large customers (250+ employees). The annual rate of switching and/or re‑negotiating remains at around 4%.
  • Satisfaction levels remain stable – with 78% of customers reporting they are satisfied with their current provider.
  • Complaint levels remain higher than before market opening but are falling – complaints recorded by the Consumer Council for Water (‘CCW’) have fallen. However it remains clear that, where customers are dissatisfied or lodge complaints, the main issues are still customer service and problems with billing.
  • Take up of water efficiency services has increased but remains low – only around one in twenty (6%) switchers in the last 12 months reported receiving new water efficiency or leak detection devices as a result of switching.
  • New entrants are acquiring more customers – at the end of year three, new entrants (those who entered the market without acquiring a customer base from the previous monopoly incumbents) are gaining around 1% market share per year.
  • Self-supply continues to be a popular option amongst larger customers – in year three, an additional three self-supply licences were granted (Nottingham City Council, John Lewis Plc, and Kelloggs); bringing the total to 12 as at end March 2020.

Market frictions

In our report on the market’s first year of operation we identified three main market frictions that were impeding the market from operating more effectively:

  • poor quality consumption, customer and asset data;
  • cumbersome and inefficient Wholesaler/Retailer interactions; and
  • inadequate wholesaler performance.

In our report on the market’s second year of operation we noted that progress to resolve frictions had been slow and called on trading parties to take decisive and swift action to resolve market frictions.

Our assessment of year three is that industry efforts to improve market functioning have accelerated, aided by collaborative leadership from the market operator (MOSL). However, and as detailed in our recent report on incumbent company support for effective markets, we find that resolution of market frictions continues to require urgent attention from all trading parties if the improvements we have seen to date are going to really gain traction and increase going forward. MOSL has set out a programme of work to support more effective market functioning and we strongly encourage trading parties to work collaboratively with MOSL in delivering this.

Customer insight survey

The priorities, views and experiences of customers are essential in understanding whether, and how, the market is functioning effectively and delivering for customers. To this end we appointed BMG Research to undertake quantitative and qualitative research into customers’ experiences of the market. The findings of this research are presented here in three reports, alongside the quantitative data tables.