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 fourth report on developments in the business retail market, covering the fourth year of its operation (April 2020 – March 2021). It updates our previous reports – Open for business July 2018, State of the market report 2018-19 July 2019 and State of the market report 2019-20. This years findings have been presented using an interactive report format.
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 2020-21 report.
We continue to see differing outcomes for business customers in the market dependent on their size, with benefits accruing more strongly to larger customers. Smaller customers continue to have lower levels of awareness and engagement in the market when compared to their larger counterparts.
- Awareness levels in the market have decreased – 43% of business customers are aware that they have a choice of Retailer. This compares to 58% in 2019-20 and 53% in 2018-19. This fall in awareness is driven predominantly by micro customers (0-9 employees).
- The number of customers that were active in the last 12 months has slightly increased – 9% of eligible customers were active in the last 12 months compared to 8% in 2019-20, and we continue to see a higher number of large customers active in the market in the last 12 months (28%).
- Indicators on switching and renegotiation rates are mixed – Analysis of MOSL data and RFI data indicates annual rates may have fallen in the fourth year of the market compared to previous years. In contrast the findings from our CIS 2021 research finds that switching rates have increased slightly compared to 2019/20.
- The majority of customers continue to state that they are satisfied with their current retailer – 73% of customers report they are satisfied with their current provider
- Complaints received by CCW and Ofwat fell from previous years – Billing and charging remain the most common reasons for customer complaints.
- Incumbent retailers continue to lose market share to new entrants – New entrants continue to gain around 1% of SPIDs each year. Despite gains made by new entrants and self-suppliers, incumbent Retailers continue to account for the large majority of market share.
Progress on market frictions
Our market monitoring work as well as dialogue with industry and stakeholders has consistently highlighted three principal market frictions that are impeding the effective functioning of the market. Our assessment of the fourth year of the market highlighted efforts to improve market functioning but noted the resolution of market frictions continued to require urgent attention from all trading parties.
Since then market participants, led by MOSL, have made significant progress in introducing a new Bilateral Hub which should materially improve Wholesaler-Retailer interactions by standardising and automating these transactions.
However, whilst we note the need for industry to address the effects of the Covid-19 pandemic during the fourth year of the market, it is nevertheless disappointing that industry made little progress during 2020-21 on reform of the Market Performance Framework (MPF). Given the key role the MPF can play in helping to resolve market frictions we see progress in this area as a key priority for the market. Recognising the importance of well-designed incentives to address issues in the market, in particular data quality issues, we consider this work crucial to improving market functioning and enabling good outcomes for customers.
Ofwat considers the business retail market has the potential to deliver improved outcomes for customers, society and the environment, but is clear this will require market participants to take action, including by stepping up efforts to resolve poor quality market data.
Customer insight survey
We will publish the full customer insight report and data tables in the new year.