Synthesis of market data on low water use business customers’ experiences of the water retail market

One of CCW’s recommendations from our Five-Year Review of the water retail market, published in March 2023, was for there to be a change to the eligibility criteria in England unless tangible benefits were realised for low water use businesses by 2025.

Based on evidence from the first five years of the market opening in England, there were notable differences for low water use businesses compared to businesses of other sizes. Generally, they were not experiencing the wider benefits a competitive market can deliver, nor were they aware of – or engaging in – the market.

To compare the current position of these businesses with our conclusions in 2023, we commissioned CEPA to collate and analyse all relevant evidence on the experience of low water use businesses in the water retail market.

The CEPA report provides us with an independent view on which to base our decision about whether these businesses are truly benefiting from being in the open market in England, or whether they would see greater benefits from receiving their water, sewerage and retail services from a water company.

Key findings from the CEPA report

The water retail market for low water use businesses is not very ‘dynamic’ and has not delivered the benefits that were expected when the market was originally opened. The main drivers of this low dynamism appear to be low levels of awareness across these businesses, low price differentials, and few perceived benefits from switching retailer.

• The data does not clearly show that low water use businesses suffer systemic detriment from being in the market. While there are a high number of complaints against retailers, it is not possible to conclude that micro and small businesses are disproportionately affected by these issues.
• There have been some improvements since 2023, with the percentage of supply points (SPIDs) which have switched at least once continuing to increase, research evidence showing engagement increasing, and the potential for price savings from switching away from the protected price cap having increased.
• There is evidence of a downward trend in customer satisfaction in retail services for micro businesses between 2022 and 2024.
• CCW’s call for an increase in switching by 10% points by April 2025 has not been met. At the present switching rate, it appears very unlikely that the recommended target will be achieved by the end of 2025.
• There may be significant benefit in CCW working with Ofwat and other industry stakeholders to develop an awareness campaign centred around customer service performance league tables, focused on these businesses.