Media Release

Consumers suffer as pandemic hits competition and boosts big business

Key consumer markets became less competitive during the pandemic as customers shopped around less and big suppliers captured a greater market share, new research reveals today.

The Social Market Foundation said politicians and regulators must make competition a greater priority during the economic recovery, warning that more competitive markets are needed to deliver better deals for consumers and a more dynamic economy outside the European Union.

The SMF, a cross-party think-tank, found that the share of customers who switched suppliers for gas, electricity and personal banking fell in 2020. In business banking, the “Big Five” banks used government loan schemes to increase their dominance of the market.

The findings should serve as a “wake-up call” to politicians and regulators about the need for bolder action to boost competition and help consumers shop around, the think-tank said.

Reduced competition for customers’ business means suppliers face less pressure to lower prices and improve services. The SMF warned that falling competition in key markets risks reversing important economic gains made for consumers in recent years.

During 2020, the percentage of households who switched gas suppliers fell from 20.5% to 18.7%. For electricity customers, switching fell from 20.8% to 20.2%. In the current account market, switching rates fell from 2% to just 1.4%, the lowest rate in at least five years.

In the market for lending to small and medium-sized companies, the five banks – Barclays, HSBC, Lloyds, Natwest and Santander – were able to increase their share of the market. In 2020, challenger and specialist banks’ share of total gross lending to SMEs fell to 31%, a significant decline from 48% from the previous year and the lowest on record.

The SMF has tracked competition in UK markets for several years, finding that before the pandemic, several important markets were becoming more competitive as consumers shopped around more.

Between 2015 and 2019, annual customer switching rates for both the electricity and gas markets increased markedly, from 12% to a record high of over 20%. At the same time, prices fell and consumer satisfaction rose. Similar progress has been made in the supermarket sector, where the arrival of Lidl and Aldi has pushed all suppliers to offer better deals.

The SMF said that more such progress was needed in other consumer markets, especially personal banking, where despite repeated promises by regulators to encourage competition, switching rates remain extremely low.

Customers who remain with the same provider year after year are at risk of “loyalty penalties”, higher prices than those charged to new customers. Citizens Advice has put the cost of those penalties at more than £5bn a year, with more than half of that coming from banking.

The SMF said that new measures to promote competition in banking are needed, including regular “prompts” from regulators to ask current account customers if they are happy with their supplier and want to switch. Public bodies should be told to switch their banking regularly too.

More broadly, the SMF said that the Government should appoint a new “Minister for Competition” and require the Competition and Markets Authority to carry out an annual survey of the state of competition in UK markets. (Full recommendations below.)

Scott Corfe, Research Director at the Social Market Foundation, said:

“It would be understandable if people facing a pandemic had more pressing priorities than switching energy suppliers or bank accounts, but the pandemic cannot be allowed to reverse recent years’ progress and entrench the power of big business at the expense of consumers and small businesses.  

“These findings should be a wake-up call for politicians and regulators about the need to do more to encourage competition.”

James Kirkup, Director of the Social Market Foundation, said:

“Politicians enjoy arguing about economic ideologies, but no matter what party they’re from they should agree that more competition between suppliers is good for consumers and good for innovation. Britain outside the European Union needs a new economic strategy, and a strong drive towards more competition in markets should be a cornerstone of any new model.

“Outside the European Union and after the pandemic, Britain needs to decide on its economic priorities. Anyone who wants an economy that works better for consumers and pushes companies to innovate should have greater competition at the top of their agenda.”

Dan Frumkin, CEO of Metro Bank, said:

SMF’s report lays bare the vast differences in competition across various industries and in banking it’s clear we lag behind. It means our customers are losing out – whether that’s on innovation, better prices, or improved products and services. Despite efforts from smaller lenders and new entrants, capital requirements are restricting our ability to compete and inadvertently cementing the big banks’ dominance.

“As we emerge from the pandemic, it’s more important than ever we do our best to create the conditions businesses need to survive and thrive. Competition is key to this and I hope policymakers will take note of SMF’s recommendations to unlock the untapped potential in mid-tier banks.”

  • The SMF report was sponsored by Metro Bank. The SMF retained full editorial independence and is committed to publishing the names of all its sponsors and funders.
  • The report, Banking and competition in the UK economy, is published at 07:00 on Monday 10th May, at
  • For media enquiries, please contact Linus Pardoe, SMF Impact Officer – – 07402 576995


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