The UK’s economic status quo is at a critical juncture. Faith in a largely “free market” settlement is increasingly in doubt, as household incomes are squeezed and many fail to see economic growth translating into an improvement in their day-to-day lives.
Perceived corporate excesses, such as high profits and prices, have led to a growing belief that the system is rigged, with the benefits accruing in the hands of a small elite at the expense of the ordinary UK household.
In this environment, it is more important than ever that consumer markets work well and deliver good outcomes for households. If they don’t, markets risk being replaced with state ownership as the electorate loses faith in private enterprise.
This would, in our view, be the wrong path for the UK to go down. At their best, free and functioning markets are a driving force of job creation, innovation and prosperity. They expand consumer choice and keep prices low as companies compete to win and keep customers. New “challengers” who enter markets can place pressure on incumbent businesses, pushing them to offer better prices and invest to improve their services.
All too often, however, consumer markets see custom concentrated in the hands of a small number of large companies. That’s bad for customers and bad for the wider economy: where companies don’t have to fight hard to win and keep their customers, they face less pressure to reduce prices and to increase quality, to invest and to innovate. That is, concentrated markets are often uncompetitive.
This SMF report provides new insights into the state of consumer markets in the UK. In particular it examines the extent to which the UK’s consumer markets are competitive and concentrated and the impact this is having on consumer outcomes. We explore the extent to which consumers could see significant gains, such as lower prices and higher levels of customer service, if markets became more competitive.