The deregulated water market has failed to whet the appetite of small businesses, despite the promise of better deals. What can turn a trickle of switchers into a flood?
A disappointing trickle of businesses has switched water supplier since the market in England was deregulated six months ago.
The government wanted market transformation to open the floodgates to increased competition among water suppliers. It would lead to more choice, improved customer service and savings for small businesses.
However, only 53,268 switches had taken place by 1 September 2017. This figure includes around 11,000 switches that occurred as part of the test phase before the market opening. That’s a shockingly low 2% of the market. With an average of 1,922 switches a week since the market opened in April, there is a risk of stagnation unless changes are made with the interests of small businesses at the forefront of the strategy.
Reasons for low uptake
So, why aren’t businesses taking the opportunity to renegotiate their water contracts or find a new supplier? Lack of awareness about the benefits of switching and a lack of standard and simplified pricing are two reasons for the slow drip of businesses opting to switch.
Edelman Intelligence conducted a survey of business attitudes towards water deregulation for Utilitywise last year. It found that just 41% of English businesses were aware of the change, and awareness had a direct result on firms’ appetite for switching. Of the informed businesses, 74% said they were likely to switch, compared to just 37% of those that were poorly informed.
The main reason for considering switching, said 56% of the businesses surveyed, was a better price. Businesses could share in £200m worth of collective savings but the switching process is often too time consuming, particularly for smaller businesses, given the lack of standard procedure.
Brendan Flattery, CEO of Utilitywise, said: “With deliberately confusing and non-standardised pricing and Ofwat not doing enough to promote the open market, it’s near impossible for small businesses to take advantage of the savings as they don’t have the time required to interact with approximately 20 suppliers separately.”
Benefits of taking the plunge
Utilitywise believes more needs to be done to make businesses aware of switching’s benefits and incentivise them to switch.
First, there are ways to boost your savings margins right now. Multi-utilities contracts offered by Utilitywise, which combine electricity, gas and water, are already saving businesses up to 25%.
Second, small companies can look forward to less hassle if they switch with the help of Utilitywise experts. One example is when we organise a single streamlined bill instead of different ones from different water areas.
Our survey showed that 24% of English businesses would switch for greater transparency on pricing from different suppliers, while 22% wanted a better customer service. Businesses can achieve both because the increased choice that switching brings allows them to choose a supplier with better service and more accurate billing.
Better savings are on the horizon
The savings may be modest now, but increased competition in the water market will lead to greater savings in the future and better service.
In three years’ time, industry watchdog Ofwat is expected to encourage a reduction in wholesale prices. If it does so, the English market could follow the Scottish Water market’s lead. When its regulator widened retail margins following deregulation in 2008, it helped all businesses in Scotland to save more than 20%, and now around 50% of businesses have switched. Unfortunately, Ofwat has refused to follow Scotland’s example and English businesses are missing out as a result.
With so many pluses for small businesses, we need to bring more on stream to make switching water supplier as successful as it is in Scotland. What’s more, if the gas and electricity market can do it, so can the water market.
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