A report, Commissioned by the Chancellor and the Business Secretary, has been published by the CMA analysing how well competition is working across the UK economy.
The key take-home points from the report are:
- The indicators examined suggest that competition across the economy as a whole may have declined over the last 20 years.
- 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.
- 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 surveys suggest that 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%). Evidence also shows that transport, telecommunications/mobile/internet, utilities and property services perform relatively poorly when it comes to satisfaction and trust.
- The UK scores relatively well in these surveys on consumer switching in some service markets, although switching is not as common among low income and financially insecure consumers.
The report also gathered information on the impact of coronavirus on competition in the UK. Although too early to draw definitive conclusions, initial data shows that:
- Since the start of the pandemic, 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. The main reason given for shopping round less is feeling safer buying in one place, which could suggest this drop is temporary.
- 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.
- Most businesses did not report experiencing any challenge in selling goods and services online during the pandemic.
- 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.
- Construction, accommodation and 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 Q1and Q2 2020.
- 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.
For more information, and to read the report, visit the State of UK Competition report page.
Dr Richard Wilson OBE, CEO of TIGA, said:
“TIGA welcomes the CMA report into competition in the UK. With regards to the digital economy, close attention should be paid to addressing the emergence of a small number of dominant firms which make it harder for new companies to enter or scale-up.
“Furthermore, merger policy ensure that dominant companies are not able to abuse their positions. The Furman Review highlighted that the largest digital companies have made ‘extensive use of mergers’ and that ‘acquisitions have included buying businesses that could have become competitors to the acquiring company’. The Review found that ‘over the last ten years the five largest firms have made over 400 acquisitions globally’. None of these have been blocked.
“The UK is one of the finest games development centres globally, with outstanding small, medium and large studios creating content that sell all over the world. However, many studios find it hard to scale up because of difficulties accessing finance and skilled personnel. The Government should address these challenges by enhancing Video Games Tax Relief, introducing a Video Games Investment Fund, strengthening the UK Games Fund, and enabling businesses to recruit highly skilled workers from the EU and beyond. This will enable more UK games businesses to expand, grow and compete with their international competitors.”