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The state of the UK energy retail market

PA Consulting’s Peter Siggins, energy expert, recently participated in a Utility Week webinar on the future of the energy retail market and how much of an impact political pressures such as the price cap and Brexit are having.

The webinar explains that the energy retail market is in a state of flux as pressure on suppliers increases. The big six have long dominated the market but are now rapidly losing market share as more smaller, more agile new entrants flood into the sector.  

Peter foresees big changes ahead, but he remains “relatively positive” about the market. “There’s certainly a lot happening in terms of the competitive landscape, but in general I would see that as healthy rather than unhealthy competition. Albeit with the spate of recent failures there are things to be improved.” 

On the implication of Brexit, Peter suggests that Brexit will ultimately herald an increase in retail prices. “I’m not familiar enough with interconnector agreements or the detail of it to know precisely what the impact could be, but in broader terms we know Brexit introduces a lot of uncertainty, and with the foreign players in particular in the UK market, who knows what impact any sort of Brexit might have – whether it’s a soft Brexit, hard Brexit or whatever.” 

The energy price cap, brought in by Ofgem on 1 January, has been a challenge for retailers large and small. Peter says: “The introduction of the price cap is a bit of a blunt instrument, and in the context of the recent price rises, it does introduce complexities.” 

Peter goes on to suggest that the introduction of the cap is likely to have some “unintended consequences” in terms of how the competitive market works. He explains: “For the smaller retail players, it does mean there are implications in terms of hedging strategies. When you look at the make-up of the retail price offsetting in terms of looking at operating costs there’s not much to be had there, so it is going to continue to create difficulties.” 

Commenting on smart meters, Peter goes on to say that they will have a positive effect on the market in the long run. “An increasing customer interest is not only energy consumption but where we’re buying it from, will mean we continue to see a positive transformation in the market.” 

Read the full article on Utility Week

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