1,000 jobs to go in Northern Electric efficiency drive

Northern Electric will cut up to 1,000 jobs by the end of the decade in a continued efficiency drive which has already reduced the workforce by 1,700 since the company was privatised. At the same time Scottish Power said it would axe 350 jobs over the next 12 months at Manweb following its acquisition of the electricity firm.

The Labour party attacked the moves as the "latest utility jobs massacre". Ian McCartney, Shadow Employment Minister, said: ''These latest job losses come on top of more than 42,000 jobs already cut in electricity companies since the privatisation process began in 1990."

He added: "Cutting staff may give quick fix to the balance sheet, but it does not necessarily improve service to the consumer, who also ends up paying for former utility employees to be unemployed."

One City analyst said that the planned reductions at Northern are an "interesting pointer" for the rest of the industry. "Most of these companies are still over-manned and under managed," he said.

David Morris, Northern's chairman, said that 200 jobs would go both this year and next, with natural wastage then reducing the workforce each year by "approaching that" number. He added: ''Our task is to make ourselves as cost effective as larger players and clearly that is an uphill task."

Mr Morris said that the company has had approaches from a number of foreign suitors since the lapse of a hostile bid by Trafalgar House earlier this year but that there have been no "serious discussions". He hinted, however, that the company would be interested in merging with another regional electricity firm, but added: ''We are happy to remain independent. What we are about is giving value to our shareholders."

He was speaking as Northern announced a fall in pre-tax profits to pounds 58.7m in the first half of the year from pounds 63.4m in the same period last year. The fall was partly due to the pounds 2.9m cost in advisers' fees of issuing special dividends and preference shares as part of the company's package of shareholder sweeteners offered in defence of the Trafalgar House bid.

The results were also distorted by higher interest charges after a share repurchase and a non-recurring property disposal in 1994. The interim dividend of 12p represents an underlying increase of 7 per cent over last year. The company's shares closed unchanged at pounds 5.83.

Mr Morris said that future growth prospects will come both from improved efficiency and from unregulated businesses, including gas production and retailing, power generation and supply of electricity to commerce and industry.

Separately, National Power and PowerGen received a fillip from the industry watchdog, Professor Stephen Littlechild, who said that he would not extend the price cap in the electricity trading pool beyond March 1996.

The cap was imposed in early 1994 because of his concerns about lack of competition. But recently PowerGen agreed the pounds 500m sale of two power stations to Eastern Group, now part of Hanson. National Power is also on track for power stations disposals.

The statement by Professor Littlechild comes as the Monopolies and Mergers Commission prepares to start an investigation into the pounds 2.8bn bid by National Power for Southern Electric and PowerGen's pounds 1.9bn proposed takeover of Midlands Electricity.

Investment Column, page 20