The Direct Link Between Wholesale Gas Prices and Market Collapse

Report Date: 3 August 2026.

Analysis Period: July 2018 to August 2026.

Total Suppliers Failed: 54+

Total Customers Affected: approximately 6.3 million.

EXECUTIVE SUMMARY

Between 2018 and 2026, the UK energy market experienced a crisis that resulted in more than 54 energy suppliers ceasing operations, affecting approximately 6.3 million customers. The wave of failures was driven by a dramatic surge in wholesale gas prices that began in August 2021, with spot prices peaking in August 2022 at roughly six times pre-crisis levels, far exceeding what the Ofgem price cap allowed suppliers to recover from customers. The market that emerged is smaller, more concentrated and considerably better capitalised. Around 17 domestic suppliers were active in mid-2026, against roughly 50 in early 2021 and more than 70 at the market's 2018 peak.

Key Findings:

  • 2021 was the crisis year. Around 29 suppliers collapsed (51.9% of all failures) between July 2021 and May 2022, and most of the 6.3 million affected customers were transferred during 2021.
  • November 2021 was the peak month, with 11 suppliers failing in a single month. Affecting 1.88 million customers.
  • Bulb Energy was the largest casualty, with approximately 1.5 million customers. Rather than being handled through the Supplier of Last Resort process, Bulb was placed into Special Administration.
  • Octopus Energy was the biggest beneficiary, acquiring Bulb's customer base and taking its total acquired customers to approximately 2.37 million.
  • The market contracted sharply, from more than 70 suppliers at the 2018 peak to around 17 in mid-2026.

1. Top Acquiring Suppliers: Who benefied?

When energy suppliers fail, Ofgem's "Supplier of Last Resort" process transfers customers to surviving companies. The table below shows which companies took on the most customers:

Top 10 Acquiring Suppliers (2018-2026)

Closures by Year & Peak Closure Months

2.The Crisis Timeline: How Gas Prices Triggered Market Collapse

3.Why Did the Price Cap Cause So Many Failures?

The Ofgem price cap, designed to protect consumers, became a death sentence for poorly-managed suppliers:

  1. The Squeeze: Suppliers bought gas at wholesale prices (7.0-25.0 p/KWh) but could only charge customers the capped rate.
  2. Failed Hedging: Many small suppliers didn't buy energy in advance to lock in prices.
  3. Credit Balance Dependency: Some suppliers (like Avro) relied on customer credit balances to fund operations.
  4. Fixed-Rate Tariffs: Suppliers were locked into year-long fixed contracts at pre-crisis prices.

Result: Companies selling energy at a loss, burning through cash reserves, and ultimately collapsing.

4. THE HUMAN COST

Customer Impact:

  • 6,012,316 customers were forcibly switched to new suppliers.
  • £2.6 billion cost to consumers (excluding £1.7bn taxpayer bailout for Bulb).
  • £94 average cost per household to cover failed supplier costs.
  • 10 million households estimated to be in fuel poverty by mid-2025.

Market Transformation

Before Crisis (2021):

  • 70 energy suppliers operating.
  • Competitive market with low-cost deals.
  • Many "challenger" brands offering 100% renewable energy.

After Crisis (2025):

  • 25 suppliers remaining.
  • Market dominated by large, established firms.
  • Reduced competition and choice for consumers.
  • Higher barriers to entry for new suppliers.

5. Root causes: why did so many fail?

The "Big Ten" Casualties

  • Inadequate hedging. Many small suppliers did not buy energy forward, leaving them exposed to spot market volatility. When prices spiked they were forced to buy at peak prices while charging capped rates.
  • The price cap paradox. The cap protected consumers but prevented suppliers from passing through wholesale costs at the speed those costs were rising. The gap between the cap adjustment in October 2021 and the underlying movement in wholesale prices was the immediate trigger for most of the autumn failures.
  • Weak capitalisation. A large number of challenger suppliers had entered the market with minimal capital reserves and no meaningful buffer against sustained losses. Ofgem's own data shows the sector's aggregate net assets stood at negative £1.7bn at the low point. Fixed rate tariff risk. Suppliers holding books of 12 to 24 month fixed contracts sold at pre-crisis prices had no route to recover costs as wholesale prices rose.
  • Regulatory failure. Citizens Advice found that Ofgem had missed multiple opportunities to regulate the market, and reported a fall in enforcement staffing between 2017 and 2021 despite growing concerns. The National Audit Office's June 2022 report reached similar conclusions, identifying under-resourcing, delayed intervention and inadequate licensing standards as contributing factors.

6. CURRENT STATUS (2026)

2025 to 2026 All figures are for a typical dual-fuel household paying by direct debit, including VAT, as announced by Ofgem.

For the July to September 2026 period, Ofgem published two figures: £1,862 on the established typical consumption basis, and £1,663 adjusted to reflect reduced average household consumption. Both were published on 27 May 2026. Comparisons with earlier quarters should use the £1,862 figure for consistency.

Market and supply position

Market Today

Around 17 domestic suppliers were active in mid-2026. There have been no major supplier failures recorded in 2026 to date. The most recent failures were Tomato Energy in November 2025, affecting approximately 15,000 customers, and Rebel Energy in April 2025, affecting approximately 90,000 customers, both of which point to continuing pressure at the smallest end of the market rather than systemic stress.

Price Outlook

The 13% increase in the cap for July 2026 was driven in part by a spike in wholesale prices in March 2026 linked to Middle East tensions. A reminder that the UK's exposure to global gas markets remains substantially unchanged.

CONCLUSION

The 2021 to 2022 UK energy supplier crisis was the result of a perfect storm: surging global gas prices, inadequate hedging by lightly capitalised challenger firms, and a price cap that prevented timely cost recovery. It consolidated the market toward larger, better-capitalised suppliers, with consumer and taxpayer costs running into billions.

Since March 2025, Ofgem has enforced binding capital adequacy rules and strengthened licensing requirements, and the sector has rebuilt its balance sheet accordingly. Those reforms make a repeat collapse considerably less likely. But because they do not resolve the UK's underlying gas dependency, global price volatility, such as the March 2026 spike linked to Middle East tensions, remains a material risk to bills and to market stability.

The transition to renewables, storage and demand-side flexibility is therefore no longer framed solely as an environmental imperative. It is an energy security and price stability question, and on the evidence of the last five years, a commercial one for every business buying energy in the UK.

How can Purely Energy help?

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