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Small business customers are less engaged with the non-household water market and miss out on benefits of competition and choice, Ofwat’s State of the Market report has shown.
The report found business customers who are active and engage in the retail market have benefitted, however participation is higher among larger customers.
More than a quarter (28%) of larger businesses were active in the past year compared to 8% of micro-businesses. Ofwat added that incentives to engage were greater for larger customers.
The regulator found medium-sized customers could save around £250 per year by switching retailer compared to £15 for small customers.
Georgina Mills, director business retail market at Ofwat said: “Our state of the market report demonstrates that while the market continues to deliver benefits for some, mainly larger, business customers, the market is working less well for smaller customers. We consider the market can deliver improved outcomes for customers, but this requires urgent action from market participants, including to improve data quality.”
Following a consultation process, Ofwat found that competition is not yet working effectively for smaller customers and proposed to retain price protections for these customers. It will publish a review next summer assessing whether price caps need revising and what forward-looking costs an efficient retailer was likely to incur.
Mills added: “A strong and sustainable business retail market should benefit customers, but not if costs from inefficiencies are passed onto them. Our review of the business retail price caps will look to address this.”
Ofwat praised collaborative work across the sector to improve interactions between wholesalers and retailers, especially with the creation of the bi-laterals hub in September to streamline communications.
However, it called for “urgent and coordinated action” to improve the quality of market data.
Data availability and quality was identified as a persistent point of friction in the sector, alongside inadequate wholesaler performance and inefficient interactions between retailers and wholesalers.
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