The UK’s Big Six energy suppliers lost over a third of their profits over the last year, according to Ofgem.
The industry regulator’s ‘State of the Market’ report has revealed that profits for the Big Six suppliers – British Gas, E.ON, EDF Energy, npower, Scottish Power and SSE – have fallen by 35% since last year. The total profits of the Big Six from their domestic energy supply was £599 million over the previous year, compared to £924 million the year before.
The overall profit margin of the six firms fell to 2.7%, the lowest it’s been in nine years. British Gas had the highest profit margin of 7%, while npower had the lowest at almost -4%.
The main reason for this fall in profits, according to Ofgem, is the fact that more and more customers are switching to challenger suppliers.
The six major firms, who only a few years ago had a near-monopoly over the UK energy market, have lost around 1.3 million customers to smaller suppliers over the last year. Their collective market share was approximately 70% of domestic customers in June, down from 75% in June 2018.
The Big Six had warned earlier in the year that Ofgem’s energy price cap would negatively affect their profits as there was a limit to what they could charge customers. The price cap and heightened competition has affected smaller suppliers too, with over a dozen small energy suppliers going bust since the start of last year.
Recent data from Ofgem has also revealed that the energy industry’s efforts to tackle climate change are slowing down. Greenhouse gas emissions fell by 2.5% last year, down from the 3% fall the previous year and the smallest reduction since 2012.
“We want the UK to remain a global leader in bringing down greenhouse gas emissions, and our major objective is to help the country rise to the challenge of cutting emissions to net zero by 2050 at the lowest possible price to consumers,” said Joe Perkins, chief economist at Ofgem. “As well as protecting consumers in the future, our duty is also to protect those today.”