Ofwat has published its 2023-24 update on the business water retail market – the regulator has published a report summarising key market developments, including where and how the market is delivering for customers every year since market opening in April 2017.

Around 1.2 million business customers in England and eligible business customers in Wales can choose their supplier of retail water and wastewater services.

Ofwat says the yearly analysis of market developments forms an important part of its understanding of the extent to which competition may be delivering for customers and more widely, including in respect of environmental and water scarcity issues.

The 2023-24 Market Update provides an overview of developments in the market's seventh year of operation from April 2023 to March 2024.

Key findings include:

Customer landscape

A small number of high consumption customers account for the majority of clean water consumption in the market. In contrast, despite almost half of all customers in the market consuming less than 0.05Ml per year (less than the average household customer), they account for only 2.3% of all water consumption in 2023-24.

Supplier landscape

New Entrants (those Retailers who have grown their customer base organically as opposed to transferring a customer book) continue to succeed in their acquisition of customers, growing their market share by 1.6% in 2023-24. They now serve 8.5% of all supply points (SPIDs) in the market. Growth of New Entrants since market opening, around 1.2% per year on average, has been especially driven by the sustained growth of one New Entrant Retailer.

Customer activity and switching

New Entrants (those Retailers who have grown their customer base organically as opposed to transferring a customer book) continue to succeed in their acquisition of customers, growing their market share by 1.6% in 2023-24.

They now serve 8.5% of all supply points (SPIDs) in the market. Growth of New Entrants since market opening, around 1.2% per year on average, has been especially driven by the sustained growth of one New Entrant Retailer.

2023-24 switching data indicate that of the total SPIDs that switched away from Incumbent Retailers, over 54% of these switched to a New Entrant. 2023-24 marks the first year in which the total SPIDs that switched away from Incumbent Retailers were predominantly acquired by New Entrants instead of other Incumbent Retailers.

Customer outcomes

CCW complaints data paint a mixed picture. CCW reported that written complaints to Retailers fell by 6% compared to 2022-23, meaning 2023-24 was the first year in which this measure fell below the level observed prior to market opening.

However in contrast, total business customer complaints received by CCW increased in 2023-24.

Both Ofwat and CCW highlight that Trading Parties can do more to drive a reduction in complaints and improve customers’ experience.

Price savings have increased

Price savings available to smaller customers appeared to have increased. On average, compared to 2020-21, Retailers have for 2023-24 reported increased savings available to the smallest customers relative to the maximum charges permitted under the Retail Exit Code (REC) price cap protections.

Progress on market frictions

Industry has made significant progress in 2023-24 in addressing two key market frictions, namely poor quality market data and Wholesaler performance, both of which are important in the timely and accurate billing of customers, effective market operation, and a positive customer experience.

Improvements here have also been accompanied by industry work aimed at improving the functioning of the market more generally.

Overall, weaker competitive pressures for smaller customers appear to remain in the market

Overall, weaker competitive pressures for smaller customers appear to remain in the market, as evidenced by lower switching and activity for these customers. Motivations for this customer segment to switch continue to appear lower than for larger customers – as evidenced, for example, by available price discounts.

Ofwat comments:

“We therefore anticipate an ongoing need for regulatory protections for these customers, which will be relevant for our next review of price protections. Under current conditions we expect to commence that review in 2025, with any revisions to price protections taking effect from April 2027.

“We highlight some of the areas for the further unlocking of customer benefits and outcomes for all customer segments, including in relation to the environment and water scarcity.

“Sustained and timely industry progress on delivering solutions to frictions, as well as efficient access to accurate data, will be key in improving market performance and enabling improved customer outcomes.”

Click here to download the update in full