E.ON Next deal to buy Ovo Energy leaves UK with just ‘big three’ energy suppliers

E.ON Next will now become the UK’s second-largest energy supplier, narrowly behind Octopus Energy. Photograph: Mark Richardson/AlamyView image in fullscreenE.ON Next will now become the UK’s second-largest energy supplier, narrowly behind Octopus Energy. Photograph: Mark Richardson/AlamyE.ON Next deal to buy Ovo Energy leaves UK with just ‘big three’ energy suppliersCompetition watchdog clears takeover despite concerns that suppliers will have less incentive to lower bills

Almost three-quarters of households in Great Britain are now served by just three energy suppliers, after E.ON Next completed a deal to buy Ovo Energy despite fresh concerns about competition in the energy market.

The takeover concluded on Thursday after Britain’s competition watchdog cleared it, despite concerns that the shrinking number of household energy suppliers could mean billpayers will have less choice and suppliers will have less incentive to lower bills.

While there will be no immediate change for Ovo’s 4 million customers, the sale means that E.ON Next, which already supplies 5.6m households, will hold 25% of the household energy market and become Great Britain’s second-largest energy supplier.

This puts the supplier’s hold on the market narrowly behind Octopus Energy, which holds a 26% share, and ahead of legacy energy incumbent British Gas, which was once the top supplier but today serves about 23% of households.

It also deals a blow to the decade-long efforts to dismantle the dominance of what were the “Big Six” energy suppliers to increase competition and lower energy prices.

Tom Goswell, the energy supply lead at Cornwall Insight, a leading consultancy, said: “The big six have become the big three, and there have been questions raised over how this will impact household choice and the health of the market.”

Those concerns were rebuffed by Chris Norbury, chief executive of E.ON UK, who described the market as “fiercely competitive” and said the company’s “flexibility and scale” would allow it to “deliver for customers now and to transform for the energy system to come”.

The legacy big six suppliers – British Gas, EDF Energy, E.ON UK, SSE, Scottish Power and npower – dominated about 85% of the energy market in 2016 when a landmark investigation by the CMA warned that customers were overpaying by roughly £1.4bn to £1.7bn every year due to weak market competition.

As a result of the E.ON deal, about 90% of Great Britain’s household energy supply market will be held by only five suppliers when including EDF Energy and Scottish Power alongside the big three.

Although there was a surge in new energy start-ups after 2016 – led by Octopus, Ovo and Bulb Energy – the market began to shrink after SSE sold its household supply business to Ovo in 2019, and dozens of suppliers went bust during the 2021/22 energy crisis.

Octopus became the biggest supplier in the market after taking on 1.5 million customers from Bulb, which became the biggest casualty when it went into administration in 2022.

“Larger suppliers do bring with them a degree of stability, and after about 30 firms dropped out of the market, leaving customers wondering who would be sending their next bill, stability is not something to dismiss lightly,” Goswell said.

“The concern with fewer suppliers is that the pressure to compete eases off, taking with it some of the incentive to keep prices low and offer something different. The big suppliers have the resources to give people real choice, and the test over the next few years will be whether households who shop around find a genuine range of deals waiting for them rather than three versions of the same thing,” he added.