Big Six energy giants 'will lose a quarter of their customers'

The combined profits of the Big Six could fall 40pc from £1.2bn in 2013 to just £700m in 2020 as a result of the erosion of the market share, lower profit margins and customers using less due to energy efficiency.

"We believe there will be a reversal of previous industry consolidation over the coming years as independent suppliers and generators take market share and less competitive players exit," Citigroup said.

The Big Six would all ultimately need to “restructure their supply businesses drastically to lower their costs and become price competitive, and improve their customer service experience to stem the flow of customer losses”, they said.

The analysts highlighted Npower – recently rated worst major brand in Britain by Which? - as the supplier that was most vulnerable to losing customers. “Npower, with the highest admin costs per customer and weak customer service score, appears to us least well positioned to retain market share,” they said.

They suggested that some of the Big Six may decide against the investment and overhaul needed to remain competitive and instead sell on their customers or wind down their businesses as customers leave.

“We may well see some participants simply running their supply business to maximize cashflow in the short term and exit the market at some point,” they said.

Smaller suppliers have already increased market share rapidly over the past year, from just 2pc in 2012.

Suppliers such as First Utility and Ovo Energy have been helped by unprecedented focus on energy bills following Ed Miliband's price freeze pledge, while Utility Warehouse was established as a major small supplier through a deal to take on Npower customers.

Half of customers who switch supplier now opt for a smaller company.

While greater competition on price will be good news for consumers, the analysts warn that household bills will nevertheless be 20pc higher than today, in nominal terms, by 2020, due to the costs of green energy policies and network maintenance, as well as the impact of inflation.

The forecast is revised down from a 50pc rise the analysts predicted last year, owing to lower wholesale prices and changes to levies on bills.

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