The Competition and Markets Authority has given the all clear to the merger of npower and the retail arm of SSE.

Following an investigation, the competition watchdog found that the two firms did not compete closely for customers and few customers switched between the pair.

“Our analysis shows that the merger will not impact how SSE and npower set their standard variable tariff [default] prices because they are not close rivals for these customers,” Anne Lambert, chair of the CMA’s inquiry group.

The merger of the two groups is expected to be completed in the last quarter of 2018 or the first quarter of 2019.

On the results of the CME’s investigation, SSE said: “The planned transaction presents a great opportunity to create a more agile, innovative and efficient company that really delivers for customers and the energy market as a whole.”

The Labour party said that the decision by the watchdog was concerning and said the merger could lead to consumers suffering from poor service if the merger led to job cuts.

Alan Whitehead, shadow energy minister, said: “Given that both of these companies already struggle to provide good customer service, job losses in customer care as well as other departments must be avoided at all costs.”

Theresa May is to introduce a price cap on default tariffs, also known as standard variable tariffs, which will be introduced by the end of the year. This could provide issues for the energy group.

George Salmon, an equity analyst at Hargreaves Lansdown, said: “Should the cap be more severe than expected, the new business would face a fresh headwind from day one.”

The merger between SSE and npower means the big six has now shrunk to become the big five.

Shares in SSE (LON: SSE) are trading at 1.253,50 (1359GMT).