We were all hoping that after some years of upheaval, the UK’s energy industry was about to enter calmer waters. Unfortunately, on November 5th, the collapse of Tomato Energy put a dent in that idea. At the same time, Ovo, one of the UK’s largest energy suppliers, raised doubts about its own financial future.
The result is now a market that looks steadier than in 2022, yet still far from secure. In this article, we’ll tell you more about it.
Tomato Energy’s collapse
Tomato had been on Ofgem’s radar for months. In April 2025, the regulator issued a provisional order due to concerns about capital, liquidity, and reporting. Tomato then missed major deadlines in May and August to prove it had enough liquidity. In October, Ofgem proposed a £1.5m penalty after the firm failed to fix these issues. When Tomato confirmed it had stopped trading on November 5th, the Supplier of Last Resort (SoLR) process began.
Ofgem assigned British Gas to take over Tomato’s 15,000 domestic and 8,000 business accounts. Customers will move to a tariff linked to the British Gas standard variable tariff, which remains within the price cap. Ofgem issued guidance to customers to take a meter reading, wait for British Gas to get in touch and not to try to switch yet.
The collapse has also reopened the debate over how tightly Ofgem should regulate suppliers. Tomato is the 31st supplier to fail since 2021, and every household has paid around £100 towards the cost of these failures through SoLR funding. Many industry experts want:
- Stronger rules
- Proper ring-fencing of customer funds
- Tighter financial discipline from suppliers
Ofgem rejects the charge that it has been slow to act. It argues that it has already overhauled the system with a raft of new rules, including new capital requirements and regulations around customer credit. You could also point out that since the crisis, the industry has moved from a position of net negative assets to around £7.5 billion in adjusted net assets. Failures will still happen, but they won’t create a knock-on effect of disaster.
Ovo’s financial woes
Ovo is one of the largest suppliers in the UK, serving around 4 million customers. It now finds itself under pressure from the same rules Ofgem introduced to avoid another wave of collapses. These rules require suppliers to hold at least £115 in capital for every customer – a test that Ovo has failed. Its most recent accounts warn of doubts over its financial future unless it secures new investment.
The company is trying to raise about £300 million, but investors have been cautious. Verdane withdrew from talks. Permira and Iberdrola also stepped back after early discussions. Ovo has turned to advisers at Arma Partners to explore selling a stake in its software arm, Kaluza. In addition, Mayfair Equity Partners wants to sell its 30% stake in the company, which adds another layer of pressure.
Although Ovo failed the resilience tests, it is not technically in breach. It has agreed a route to compliance with Ofgem and continues to work with the regulator. Even so, the company is cutting costs, with several hundred jobs at risk. It has also experienced a lot of changes at the top of the organisation, with the Chief Executive, Chief Financial Officer and a board member leaving the company.
A fragile retail market
Tomato’s collapse and Ovo’s struggle show how stretched the market remains. Smaller firms are still vulnerable to cash and compliance pressure. Larger firms must now meet capital requirements that they argue restrict investment. Investor appetite is weak in a low-margin sector that still carries risk.
Suppliers say the rules deter capital. Ofgem insists the rules protect customers and have strengthened the sector. British Gas has already absorbed customers from ten failed suppliers since 2021. Conditions are steadier than during the crisis, yet the price cap remains high and households remain sensitive to disruption.
Looking ahead, the market is in an uneasy position. The market isn’t in a total meltdown, but it’s not entirely stable either. Further consolidation is likely, but will that be down to more failing suppliers? We will have to wait and see.