Water competition to drive broker consolidation

Mergers and acquisitions among utility brokers look set to rise as the water market opens to competition in April.

Speaking to Utility Week, Inenco chief commercial officer Dave Cockshott said: “I think there will be consolidation in the broker space. I think there are literally thousands of small one-man bands, and I can’t see that as a sustainable model forever.

“The degree and complexity of the utility market means that very quickly these very small outfits will get out of date and will not be providing the best service to customers. Therefore, I think there will have to be consolidation of some sort.”

Grand Union Water Co co-founder and director Peter Sceats agreed, saying consolidation will be a way for energy brokers to come into the water market, where margins are small.

“There might be a flurry of brokers who will say they are active in the water space, but actually they are not,” he added. “Others might find that they’re better off merging.”

Orchard Energy water services commercial manager Chris Quinn said M&A had already begun and now, “we’ll see more.”

At the end of January, Waterscan managing director Neil Pendle told Utility Week he did not agree with water retailers that the brokering model is a low-cost method of acquiring new customers in the non-domestic water market.

“I think they’re completely wrong, brokering is not the option for this particular market,” he said. “I don’t think it’s appropriate, with low margins, that some of that margin goes to a broker. Frankly I’m not sure what value they add.”

His comments triggered a strong response from brokers, who insisted that they will play a “vital role” in the business water market, by driving awareness and helping organisations benefit from the changes.