Ofgem to review microbusiness energy market

Ofgem, the energy regulator, announced plans earlier this month to perform a strategic review of the microbusiness energy market – but what does that mean for businesses like yours?

Size matters

Ofgem defines a microbusiness as an organisation that operates as a non-domestic consumer of energy and:

  • employs less than 10 employees and has an annual turnover of up to £2 million; or
  • uses less than 100,000 kWh of electricity or 293,000kWh of gas per year.

Microbusinesses make a significant contribution to the UK economy, despite what their name might suggest. According to government figures, the 5 million microbusinesses operating in the UK in 2018 accounted for 21% of turnover and 33% of the UK’s jobs. 

With a socioeconomic footprint greater than the sum of its parts, the UK’s microbusiness community is clearly valuable to the UK economy –and Ofgem are concerned that the community isn’t seeing the benefits of recent legislation. 

Spiralling operating costs

UK microbusinesses were one of the groups that should have benefited most from Ofgem’s 2017 implementation of the Competition and Markets Authority (CMA) Remedy. The CMA Remedy, amongst several other outcomes,increased transparency between suppliers and microbusiness consumers with the intention of increasing the amount of relevant, accessible information available.  

Ofgem’s decision to perform a strategic view of the microbusiness energy market follows an investigation into the CMA Remedy’s effectiveness, where it found that the remedy had a limited impact. Businesses,and microbusinesses in particular, are still finding it hard to access the information they need to make an informed choice about their energy supply, and are paying a premium for loyalty to their existing supplier.

This has been ascribed to the lack of engagement between consumers and the energy market. The UK energy market has long been seen as inaccessible and confusing, with smaller businesses lacking the time or expertise to track down the most competitive rates. 

Anthony Pygram, Director of Conduct and Enforcement at Ofgem, commented:

“Microbusinesses are the backbone of the country’s economy. Yet too many are still finding it hard to navigate what is a complex and at times opaque market to get a better energy deal and are suffering significant consumer detriment as a result.”

Where does this leave your business?

It depends – can your business afford to write a blank cheque to your energy supplier?

If the answer to your question is “no”, then you’re in luck.

The long term outlook for the UK energy market is good – the CMA Remedy has already made inroads to making the market more accessible, and Ofgem’s subsequent measures will be driven by information gathered from the market itself. (If you’d like to have your say, click here).

Whilst these measures won’t come into force until next year at least, consumers still have an option that reduces the stress, time investment and confusion: use an Energy Consultancy, such as Exchange Utility. 

We do all the work for you, speaking to our panel of trusted suppliers on your behalf to find you the most competitive rates for your energy.We use our expertise to make the entire switching process as smooth and straightforward as possible, saving you up to 45%* on your energy bills along the way.

This means that you can make an informed choice on your energy supply, whilst spending your time on more important things – like making your business a success.

Call us today or fill in the form on this page for up to 45% extra savings on your energy bills!*

*When compared to out-of-contract rates

Source: https://www.ofgem.gov.uk/publications-and-updates/ofgem-announces-strategic-review-microbusiness-energy-market