Failure to switch 'keeps prices high'
Published on : 15/05/2007
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A reluctance on the part of UK households to switch energy providers is keeping prices unnaturally high, a new report claims.
A study carried out by three academics from the ESRC Centre for Competition Policy at the University of East Anglia shows that, despite continued media coverage of the benefits of switching providers, close to 50 per cent of UK households have never actually taken the plunge and signed up with a different company.
According to the report's authors, this allows suppliers to maintain a significant market share in their original local monopolies - meaning they can keep their prices unnaturally high for customers who fail to switch.
Failing to change also allows open price coordination between suppliers, the report adds - as it goes on to claim that "these market conditions make it easy for all firms to keep prices well above costs without necessitating explicit collusion".
"There are now only six significant players and these companies share an interest in keeping prices well above costs," the study continues. "The less competition facing any one firm, the less that firm is inclined, or indeed is required, to compete."
