Hundreds of hospitality companies have called on the UK’s competition watchdog to investigate the energy market amid fears that small businesses may have been overcharged.
A trade body representing the sector, UKHospitality, has written to the Competition and Markets Authority (CMA) calling for an investigation after consistently warning that businesses have been unable to get a fair deal in the energy market in recent years.
Most small- and medium-sized firms are forced to use energy brokers to secure a supply deal with a big energy company. These brokers are unregulated and firms say they have faced aggressive sales tactics and paid undisclosed commissions, which have inflated their costs.
Hospitality companies say they are frequently quoted more expensive rates for their energy to offset the perceived risk that they are more likely to go bankrupt, leading to significantly higher energy costs in the sector.
In the letter to Sarah Cardell, the CMA chief executive, UKHospitality said a formal competition investigation was “the only way to address the entrenched competition problems in this market”.
“The criteria for an [investigation] are undoubtedly met, given the reasonable grounds for suspecting that competition is not effective; the scale of the problem; and the reasonable chance that appropriate remedies will be available,” the letter added.
The call for an investigation emerged two years after the energy industry regulator Ofgem told the government it would consider recommending a full CMA investigation if it had reasonable grounds to suspect that competition in the market was not effective.
Ofgem later confirmed a lack of effective competition after its own review, but stopped short of recommending an investigation of the energy market.
Instead, the regulator put in place measures to allow small businesses access to free redress and support from the energy ombudsman to help resolve disputes with suppliers over rip-off energy deals, without costly court procedures.
Kate Nicholls, the chief executive of UKHospitality, said the business energy market remained “one of the biggest millstones around hospitality’s neck” and was “not fit-for-purpose”.
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“It has unscrupulously excluded businesses from accessing energy, charged them extortionately when they do offer contracts and treated operators with contempt when they come to suppliers for help,” Nicholls said.
“All of the conditions have been met to justify a thorough investigation and both the CMA and Ofgem have recognised independently that the market is not working effectively. With the government rightly looking at how regulators operate, a swift investigation into the non-domestic energy market would be a prime example of a good regulator acting to the benefit of the market and investment,” she added.
Ofgem and the CMA have been approached for comment.
