Non-domestic market boosts switches to two-year high

Switches between energy suppliers reached their highest point in two years in October thanks to a surge in businesses changing their provider.

Last month, 260,909 consumers switched to a new supplier, a 22% increase compared to September (214,287) and 71% up on the same period last year.

It is also the highest number of switches recorded since October 2021, before the effects of the energy crisis hit.

Despite the overall increase in the number of switches, Energy UK figures show that switches in the domestic sector stagnated with a slight decrease of around 4,000 switches between September and October.

This was masked by an uplift in the non-domestic sector which recorded an additional 76,000 switches month-on-month.

Energy UK’s electricity switching release explains that non-domestic customers typically change their contracts in either March or October, hence the uplift.

Of the 260,909 switches recorded last month, the majority (59%) were between larger suppliers with 21% seeing customers leave larger suppliers for a smaller alternative and 14% going the other way (breakdown below).

Prior to the energy crisis, the number of customers switching supplier each month often exceeded 400,000. In June, Energy UK said that “there is no sign the numbers will return to historic levels any time soon”.

It is also a long way off the forecasted possible surge predicted by analysts earlier this year.

Last month, Electralink suggested more activity is likely to come as October’s price cap reduction – to £1,923 for the average duel fuel household bill – filters through. However, analysts have predicted a rise in the cap in 2024.

The regulator has also said it will remove the market stabilisation (MSC) charge from next March, which is likely to have an impact on how aggressively suppliers are seeking to recruit new customers. This mechanism sees suppliers pay the losing company when they acquire a new customer, but only if wholesale prices fall significantly below the level assumed in the price cap.

Ofgem is still considering whether the ban on acquisition-only tariffs, which was introduced at the same time as the MSC, should also come to an end. It is currently weighing up the trade-offs of the ban on consumer protection and switching activity.

Movement between supplier groups (October 2023):

• 21% were from larger to small and mid-tier suppliers
• 14% were from small and mid-tier to larger suppliers
• 59% were between larger suppliers
• 6% were between small and mid-tier suppliers