Anger over rising UK energy bills set to be stoked by gas profit

Anger over rising energy bills is likely to be stoked next week with profit figures from British Gas owner Centrica, while BAE Systems is also due to report

Energy and Climate Change Secretary Ed Davey
Energy and Climate Change Secretary Ed Davey

Anger over rising energy bills is likely to be stoked next week with profit figures from British Gas owner Centrica, while BAE Systems is also due to report.

British Gas owner Centrica unveils full-year results on Thursday as it faces renewed political pressure over energy bills and the threat of the supplier being broken up.

Shares have plunged by more than a fifth since last autumn when Labour leader Ed Miliband pledged to freeze tariffs if the party wins power and were driven down further following a fresh intervention this month by Energy Secretary Ed Davey.

In a letter, he urged competition authorities to “think radically” as they consider whether to launch a full-scale investigation into the energy market that could see British Gas broken up.

Mr Davey’s intervention highlighted its dominance in the gas supply market, citing figures that showed its margins were several times higher than they were for electricity, and claiming consumers could save £40 a year if they were brought in line.

There was a public outcry after a raft of energy price hikes at the end of last year, including an average increase of 9.2% by British Gas - 8.4% for gas and 10.4% on electricity from November.

But a shake-up of the Government’s so-called green levies on bills saw savings which were passed on via a 3.3% reduction for the firm’s customers from January.

Last November, Centrica slashed expectations that annual group earnings would rise by 3% to 4%, saying they were now likely to remain flat at £2.7 billion after being hit by challenging conditions in its business supply arm across the UK and United States.

It said profit margins in the residential supply business would hold firm with margins edging only slightly lower to just under 5%. The division raked in profits of £606 million in 2012 and any increase is likely to spark further public anger.

In the first half of 2013, they were up 3.2% to £356m as Centrica cashed in on bitterly cold weather and tariff hikes.

Despite price rises ahead of the peak winter period, Charles Stanley analyst Tina Cook said profits at British Gas Residential were expected to fall slightly short of the company target of £600 million, with the energy supply margin slightly weaker than last year.

She said attention will also focus on customer numbers, which stood at 15.7 million in the third quarter, following a media campaign to raise customer awareness of switching.

Elsewhere, the group is in line to take over the energy supply arm of Ireland’s state-owned Bord Gais. It is also looking for a successor to finance director Nick Luff.

BAE Systems reports annual profits on Thursday following a year in which it has shed hundreds of UK jobs and faced a major setback in its Typhoon jet programme.

The group announced in November that it would stop shipbuilding in Portsmouth with the loss of 940 jobs while there would be 835 redundancies in Glasgow, Rosyth, Fife, and at Filton, near Bristol.


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