On 30 November 2020, the UK Competition and Markets Authority ("CMA") published its first state of competition report, commissioned by the UK government. The purpose of the report was to at the state of competition in the UK economy. It is intended to provide a baseline for future analysis and monitoring, by the CMA and others, to inform the work of the CMA, and to contribute to wider public debate on these important issues.
State of competition
The CMA has summarised the report's key findings as follows:
- Decline in competition: Competition across the economy as a whole may have declined over the last 20 years.
- Rise in concentration: Concentration rose as a result of the 2008 recession and, though it has decreased slightly since 2010, it remains 3 percentage points higher today than in 1998.
- Rising profits: Among the most profitable companies in the economy, profits and mark-ups appear to be rising. The firms that already had the largest mark-ups saw their mark-ups increase by 9% over the last 20 years.
- Consumer complaints: The UK has a relatively high incidence of "consumer problems" compared to EU member states and "poor complaint handling". In 2018, around 1 in 3 UK customers experienced a consumer problem across all markets, the highest in the EU (where the average is 22%). The CMA states that evidence also shows that transport, telecommunications/mobile/internet, utilities and property services perform relatively poorly when it comes to satisfaction and trust.
- Consumer switching: The UK scores relatively well in surveys on consumer switching in some service markets, although switching is not as common among low income and financially insecure consumers.
Early effects of COVID-19
In addition, the CMA placed questions in two ongoing Office for National Statistics surveys and considered “business demographic” data: the number of businesses created and closed. Although the CMA states that it is still early to draw any definitive conclusions about the impact of the pandemic on competition, it states that its initial data shows:
- Less shopping around: Around 40% of consumers report shopping around less than usual, particularly among older groups (55+) and those with an illness or condition that limits their ability to perform day-to-day activities.
- Increased concentration: The accommodation and food services, as well as the arts, entertainment and recreation sectors are more likely to report that the number of competitors in their areas had decreased.
- Online sales: Most businesses did not report experiencing any challenge in selling goods and services online.
- Postponed/reduced expansion: 40% of companies have postponed or reduced plans to expand and the new businesses created up to Q3 2020 appear to be smaller in size than in previous years.
- Reduction in new business: Construction, accommodation, food, and arts, entertainment and recreation saw the biggest drops in the number of businesses being created. There are no clear regional differences in business creation, although London is the only area to record positive business growth in both Q1 and Q2 2020.
- Business closures: There has so far been no spike in business closures, although the overall business population shrank in Q2 2020 for the first time since Q2 2017.
