E.ON Next completed its acquisition of Ovo Energy on Thursday, creating the UK's second-largest household energy supplier and consolidating almost three-quarters of the British market into just three companies, the Guardian reported on Friday.
The deal gives E.ON Next 25 per cent of the household energy market, or 13.45 million gas and electricity accounts, narrowly behind Octopus Energy's 26 per cent share of 14.3 million accounts and ahead of British Gas's 23 per cent or 12.5 million accounts. Britain's competition watchdog cleared the takeover despite concerns that fewer suppliers would reduce choice and weaken the incentive to lower bills. The 4 million households currently supplied by Ovo will see no immediate change. E.ON Next already supplied 5.6 million households before the acquisition.
The consolidation reverses a decade of efforts to dismantle the dominance of the former Big Six suppliers. In 2016 the Competition and Markets Authority found that weak competition was costing customers £1.4 billion to £1.7 billion annually. New entrants including Octopus, Ovo and Bulb Energy followed, but the market contracted sharply after dozens of suppliers collapsed during the 2021–22 energy crisis. Octopus became the largest supplier after Bulb went into administration in 2022, taking on 1.5 million accounts.
Five suppliers now control roughly 90 per cent of the household market when EDF Energy and Scottish Power are included alongside the top three. The legacy Big Six suppliers, which included British Gas, EDF Energy, E.ON UK, SSE, Scottish Power and npower, dominated about 85 per cent of the energy market in 2016. SSE sold its household supply business to Ovo in 2019, beginning the market's contraction.
Tom Goswell of Cornwall Insight said larger suppliers bring stability after about 30 firms exited, but warned that reduced competition may ease pressure to keep prices low and offer differentiated products. He noted that the test over the next few years will be whether households who shop around find a genuine range of deals rather than three versions of the same thing. Chris Norbury, chief executive of E.ON UK, described the market as fiercely competitive and said the company's flexibility and scale would allow it to deliver for customers.
Why it matters for wealth
Energy costs are a material household expense, and market concentration affects both pricing power and the range of tariffs available to consumers. For investors, the shift signals a more stable but less dynamic sector, with implications for returns in utility equities and infrastructure funds.
What to watch
Whether the three dominant suppliers maintain competitive pricing or converge on similar tariff structures over the next two years.
Source: The Guardian
Photo: Andy Coffie / Pexels
