Scottish Gas’ parent company to make 4,000 British energy workers redundant as profits collapse by 92% and shares slump 50% in past year 

The FTSE-listed giant plc which owns the Scottish Gas energy supply business yesterday announced that it is to make 4,000 workers redundant by 2020. 

The shock announcement came as Centrica plc – which also owns the British Gas energy supply business in England – reported that operating profits had fallen 92 per cent to £4 million for the year to 31 December 2017. 

The Big Six energy provider did not specify where the jobs-axe would fall. 

Centrica refused to comment on how many of the job losses would come from its operations north of the Border, or how many staff are employed in Scotland. The company employs about 33,100 people worldwide and has more than 2,600 staff based in the UK.

But Centrica said the job losses – part of an extended cost-cutting programme – would fall ‘mainly in its UK energy supply business.’

In a torrid 12 months, Centrica’s shares have plummeted by some 50% over the past year as politicians focused on ways to limit the cost of energy to ordinary consumers.

Around 12 million UK households are charged some form of default tariff for their energy, which can cost hundreds of pounds more per year than the cheapest deals on offer.

The energy supplier, which also operates in North America and Ireland, saw group profits fall 17% to £1.25 billion, while its England-only British Gas energy supply business lost 750,000 domestic customers in 2017.

That amounts to a fall of about 9%, with the company now left with 7.8 million UK domestic customers.

The government is planning to cap the standard variable tariffs – a factor which Centrica said impacted on its performance.

Iain Conn
Iain Conn

Centrica chief executive – ex-pat Scot Iain Conn – said: “The combination of political and regulatory intervention in the UK energy market, concerns over the loss of energy customers in the UK, and the performance issue in North America have created material uncertainty around Centrica and, although we delivered on our financial targets for the year, this resulted in a very poor shareholder experience.

“We regret this deeply and I am determined to restore shareholder value and confidence.” 

Conn said he ‘fundamentally disagreed’ with plans to cap prices, arguing it would reduce choice, and added:

“We will clearly be wanting to discuss all the details with the government. We don’t agree with it. We hope it doesn’t happen because we think that ultimately it will be bad for customers.”

But his excuses failed to impress either independent rivals, British energy market experts or trade unions.

Centrica’s profit fall shows the Big Six dominance of the UK energy market is coming to an end, according to the co-founder of Britain’s first app-only energy company, Pure Planet.

Steven Day, co-founder of Pure Planet, said: “British Gas’s grip on the retail energy market is weakening – with independent energy companies now supplying one in five UK customers.

“The Big Six are slipping and this can also be seen with in yesterday’s Scottish Power’s loss of 200,000 customers last year.

“The rapid growth of independents means consumers can now choose cheaper, cleaner energy for less than the Big Six polluters.”

Professor David Elmes of Warwick Business School – who is also Head of the Global Energy Research Network commented:

“Centrica’s 2017 results confirms the weak performance in the latter part of the year but paints a picture of a company more in control than its quarterly update last November which saw a 15% one day fall in its share price.

“The company’s shares are up about 4%, but shareholders are still looking at a 40% slide over the last year.

“Chief executive Iain Conn will point to progress in his repositioning of the company: more customers buying services to use energy more effectively, a shift in the company’s focus from finding gas or generating electricity to serving customers and finding efficiencies that cut costs by 10%. 

“But there are still big challenges in delivering performance today while that repositioning takes place. Supplying energy to businesses, particularly in the US, performed poorly and the company was particularly critical of plans in the UK to cap consumer prices. 

“Early comments have linked the cap to a headcount reduction of 4000 staff by 2020, pointing to a 7% fall in UK consumer accounts. It’s a bit more complex than that: many of the customers who left this year were on low price deals that Centrica lost money on. Centrica wants to sell services that help customers use energy more efficiently and a cap may limit their ability to do that.”

Centrica share price falls 50% in year to Jan 2018
Centrica share price falls 50% in year to Jan 2018

Stuart Fegan, National Officer for the GMB trade union, said: “Our members will be devastated that a further 4,000 jobs from British Gas are planned to go by 2020.

“Our members will invariably ask why they have to potentially pay with their jobs to compensate for the failing plan that Iain Conn has brought to the Centrica business.

“We do not know where these potential job cuts will fall or if any sites of business units will be affected – but we will be obviously engage with British Gas urgently to understand these proposals.

“Members will also question why a great institution such as British Gas has got itself in such a mess in such a short period of time.

“British Gas has lost 750,000 customers in 2017 and seen its share price almost halved. Employees are leaving at record levels yet the business response is ‘more of the same’.

“Last year saw hundreds of thousands of customers leaving British Gas business due to tariff rolloff on several products –  with no alternative offering to customers.

“It begs the question – why is the UK’s largest energy provider happy to haemorrhage customers?

“Iain Conn must immediately learn from the failure of other, now departed, battlefield generals that you cannot cut your way out of a crisis – GMB will fight these unnecessary job cuts.”

23 Feb 2018

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