British Gas to be split

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The Independent Online
THE 1.9 million investors in British Gas stand to receive a free handout of shares in the group's trading arm as part of a plan to split it from the main company and float it separately on the stock market, it emerged yesterday, writes William Kay.

The trading side of the operation is reponsible for supplying gas to domestic and business customers after buying it from the most economic sources. It would be an instant candidate for inclusion in the FT-SE 100, the index of the 100 biggest quoted companies.

The spin-off has been on the cards since last August, when the Monopolies and Mergers Commission urged it to separate the trading arm from the rest of the operation. At the same time, Cedric Brown, chief executive, argued that it was not necessary to split the company to encourage competition. But he regarded the sale of the trading arm as the best available option in the circumstances.

But the spin-off may not be good news for all consumers. The commission accepted that, to make a profit as a free-standing operation with its own overheads, the trading arm may have to raise its prices. And British Gas warned that the move would spell the end to cross-subsidies, which favour some consumers over others.

In April 1996, all non- household gas and 5 per cent of the domestic market is to be opened to competition. Volume limits on competition may be scrapped two years later.

The Department of Trade and Industry and the Office of Gas Supply have been informed of the trading spin-off plan.

A spokesman for British Gas said: 'We never comment on market rumour.'