The SMF’s new report, Concentration, not competition: the state of UK consumer markets, analyses 10 key consumer markets, which collectively account for about 40% of all consumer spending – cars, groceries, broadband, mobile telephony, landline-only phone contracts, electricity, gas, personal current accounts, credit cards and mortgages.
The research finds that all too often, the markets that matter most to consumers are 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. In other words, concentrated markets are often uncompetitive. The research also identifies a link between higher levels of market concentration and lower levels of customer service and trust in markets.
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.
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.