Ofgem has launched a review of the microbusiness market. It believes small firms are ill-served by the current set up, with many paying over the odds in an “opaque” market.
Ofgem said a “key focus of concern … is the activities of some brokers” and its review seeks views from small businesses about their experiences via this survey.
The regulator states: “Microbusinesses often rely on brokers to switch and weak broker regulation is allowing room for sharp practices by some brokers. Gaps in current consumer redress mechanisms add further to this harm.”
Among other questions, the survey asks for evidence of malpractice by brokers – and businesses can upload files to support that evidence as part of the survey.
Small businesses have long called for regulation of third party intermediaries and brokers, which usually make a far higher margin from small firms than corporates.
Research commissioned by Ofgem suggests small firms are being called by brokers more and more frequently, leading to an increase in concern about their activities.
Citizens Advice chief executive Gillian Guy said the review was “long overdue”, stating that some brokers “engage in outright fraud”. Ofgem needs to take action, she added.
“The lack of protections or redress for those who’ve been misled leaves microbusinesses out of pocket, undermines trust and reduces future engagement in the market,” said Guy.
“Ofgem’s review must lead to fundamental changes in the way that microbusinesses are protected.”
Microbusinesses are defined as those with up to ten employees, that use no more than 100MWh of power per year and no more than 293MWh gas. There are more than 5 million microbusinesses in the UK.
The regulator said it would outline its plans to help those firms before the end of the year. However, Ofgem may not actually take any definitive action until 2021 – with its lack of urgency drawing criticism.
See details here.
Take the survey by 21 June.
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Good to see that hard evidence is being collected – the previous attempt by Ofgem to consider broker regulation suffered from a lack of hard evidence of malpractice. I was on the working group and there was a lack of clarity about the precise nature and scale of the problem. There were plenty of anecdotes but little data. If there is evidence of fraud, misrepresentation etc. we already have perfectly good laws in place to tackle it, However, unless the problems are properly identified then how can the appropriate solutions be developed?
I too was on the TPI working party and share David’s views. Anecdotes abound. Ofgem’s annual Micro and Small Business Engagement Surveys have consistently shown overall satisfaction with services provided by TPI’s is high averaging at 77% Tellingly, where TPI’s score poorly is amongst those business consumers who have never used them.