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Wednesday, May 25, 2022

Soaring energy prices leave UK comparison sites with little to compare | Energy bills

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Sergei the meerkat and his rival Gio Compario have put comparison websites at the heart of many people’s buying decisions, but soaring energy price rises and new rules on insurance sales mean challenging times for the businesses they advertise.


At a time when consumers are keener than ever to cut bills, the websites have found themselves without any deals to offer on energy because sky-high wholesale prices mean that suppliers are not offering cheap tariffs.

The sites earn commission from companies when customers switch to them, thought to be about £30 for some energy contracts and £40-50 for insurance policies.


On Thursday, one of the biggest, MoneySupermarket, reported a 25% fall in profits last year, and said that revenues from home services, which include energy switching, were down 34%. The company said it was expecting zero revenue from its energy business in 2022.

GoCompare, one of its rivals, said 2021 was a “year like no other” in the energy market. It paused that strand of its comparison service completely in September.

“At the moment, there aren’t any competitive deals available for people to compare but we are hopeful that we can offer this service again in the near future and get back to helping our customers save money on their energy bills,” a spokesperson said.


In October, USwitch made the unusual decision to advertise to customers that they should “stay put” with their current providers and stop using its energy service until further notice. “It’s something we never thought we’d say,” a statement from the company said at the time.


The comparison sites also face the challenge of new rules banning loyalty penalties on home and motor insurance.

The regulations, set by the Financial Conduct Authority, came into effect on 1 January, and state that anyone renewing their policy with an existing provider should pay no more than they would as a new customer. Prices for customers who switch regularly have gone up, while those who stay with their providers now pay less.

At the time these rules were first announced, shares in Moneysupermarket and GoCompare’s parent company fell, and experts suggested that the incentive to shop around for insurance would reduce once the changes had bedded in.

Rising interest rates also mean the disappearance of some of the best deals on loans and mortgages.

Danni Hewson, financial analyst at AJ Bell, said the companies needed to evolve to get through the rough patch.

“They have enjoyed huge success because they’ve become an essential tool but can that tool do more to help us buy time in our increasingly busy and costly lives?” she asked.

One way to do this would be focus the business on areas where consumers are still keen to shop around and where they still stand to save money.

“Many people are desperate to get away, but our collective confidence has been knocked by changing restrictions during Covid and many people will be hunting out protection before they even start looking for their holidays,” Hewson said.

“Travel is expected to be a big money maker for price comparison sites this year, along with broadband business which has become increasingly important as our homes become more and more connected.

“And whilst that business is unlikely to cover all the losses from the energy side it should help cushion the blow.”

MoneySupermarket has already laid out plans to recoup its losses – including sending customers prompts when savings could be made on products.

“While it’s true that wholesale energy prices mean there are no competitive energy deals for consumers to switch to for now, there are numerous other ways we help consumers save on their household bills,” a spokesperson said.

“In recent months, we are seeing much more switching on borrowing and banking products, as well as travel insurance. So the ways consumers can save with us is increasing, and we are investing in our site and systems to make it easier to do so.”

It said it would be adding car insurance comparison to MoneySavingExpert, which it owns.

It also recently bought the cashback site Quidco, which offers a range of ways to save money on products via the site. It was added to the company in November.

USwitch said, too, that there were still products which people could save on.

“Mobile and broadband customers who are out of contract will likely be able to find a better deal elsewhere,” a spokesperson said. “A quarter of people are estimated to have let their broadband lapse, meaning that millions of consumers are missing out on the best deals and overpaying.”

However, it advised customers to “start the process by haggling directly” with current providers in order to negotiate a better deal before turning to them for a switch.

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Ultimately though, the energy price challenge facing most comparison sites will come to an end and when it does, experts said the switching market would recover.

Giles Thorne, financial analyst at the Jeffries Group, said that the lack of cheap energy tariffs was a “temporary rather than a structural phenomena”. However, he admitted “the timing of a return in revenue is uncertain”.

AJ Bell’s Danni Hewson added: “Energy business will have to come back. Consumers and companies alike won’t cope if tariffs stay elevated in the long term.”

She said consumers had got used to relying on comparison websites when looking for deals.

“Many people feel these sites are essential middlemen, even if they’re making the money from supplying companies with our business,” she said.

“We want control and we want choice and just being able to compare one product with another can help us understand what it is we really need and what we are prepared to pay for.”



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