UNDER EMBARGO UNTIL 07 July 2015 12:00
Energy review finally recognises business concerns, says FSB
CMA energy market investigation announced in its summary that small businesses are deterred, impeded and discouraged from saving on huge energy bills.
Commenting on the findings of the Competition and Markets Authority (CMA) following a year-long investigation into the energy market, John Allan, National Chairman for the Federation of Small Businesses said:
“The CMA was right to launch such an in-depth review of the energy industry and these findings confirm what our research has been saying for some time.
“Consumers, including the UK’s 5.2 million small businesses, are not being well served by the current energy providers, there is a lack of transparency and competition in the market and that needs to change.
“The CMA report says small businesses are being deterred, impeded and discouraged from gaining better deals within the energy market. This is leading to disengagement, which in turn reduces competitive pressures in the market giving unilateral power to energy companies to charge what they like.
“Specifically, CMA point towards a lack of tariff comparison, a distrust of third party intermediaries due to complaints of malpractice and disproportionate margins on pricing all adversely affecting small businesses.
“Now that these problems have been officially recognised, we want to see the CMA pushing to the next stage quickly and forming practical solutions.”
The FSB particularly welcomes the below findings:
Need for tariff comparison
CMA has recognised the need to make it easier for small businesses to directly compare quotes from different energy companies. Our research suggests four in five SMEs agree that published tariffs would benefit their business. Small businesses find it almost impossible to compare contracts and understand whether or not they represent the best available offer. The energy market will not function adequately until small businesses are empowered to understand and compare different offers, and trust that the switching process is a worthwhile investment of their precious time and resources. Smart meters are one way to address this issue, and FSB supports the CMA’s findings that a continued and speedier roll out will increase the understanding and engagement of those currently losing money on default payment rates.
Improvement of third party intermediaries
CMA has acknowledged that while the third party intermediary (TPI) industry has the potential to benefit business, the current unregulated system means that many small businesses simply do not trust the industry. We hope the industry will become regulated; this would ensure transparency and encourage confidence in TPIs who have a vital role to play in helping small businesses negotiate the best deals from their energy supplier.
Greater segmentation of micro business market
CMA has noted that the eight per cent margins from micro business energy bills (compared to three per cent domestic) cannot be accounted for or justified by their additional risk. Energy suppliers need to gain a greater understanding of their diverse micro business customers when assessing risk and pricing. Safe, stable businesses should not pay a premium for risky customers elsewhere in the market. Many micro businesses share the same challenges as domestic customers in the energy market. Most use similar volumes of energy, they should therefore be treated in a similar way.
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The Federation of Small Businesses is the UK's largest campaigning pressure group promoting and protecting the interests of the self-employed and owners of small firms. Formed in 1974, it now has around 200,000 members across 33 regions and 188 branches.
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