British Gas to move HQ in attack on costs

British Gas is to vacate its prestigious headquarters at Rivermill House on the banks of the Thames in its continued attempts to cut costs.

Hundreds of staff at the building, a stone's throw from the Tate Gallery, are expected to be moved within a year to Reading, which is already home to the company's exploration and production business.

British Gas has a series of London premises including offices at Holborn, Rochester Row and Marble Arch. These are expected to be whittled down to one as part of the group's attempts to rationalise its huge property portfolio.

The company, which has been at the centre of controversy over boardroom pay and perks and standards of service, is also cutting 25,000 jobs over three to five years - about one-third of the total employed in the core UK gas business.

The rationalisation involves splitting the UK gas operations into five separate businesses and is intended to prepare the company for competition in the domestic gas market. This will start with a pilot scheme next year and should be fully phased in by 1998.

Rivals, including North Sea firms and electricity companies, plan to compete with British Gas in the domestic gas business, undercutting its prices by about 10 per cent. British Gas has already lost a huge chunk of the commercial and industrial market where competition is allowed.

There is a view that the speed of change in the market - and the resulting need to restructure - has taken the company by surprise and caused the public perception of British Gas to plummet in recent months. The company has been dogged by a series of public relations fiascos since it was revealed at the end of last year that its chief executive, Cedric Brown, had been awarded a 75 per cent increase in his basic pay to £475,000.

British Gas faces another hurdle when its annual report is published at the beginning of April. The report will detail all increases in basic pay for directors, any other perks received and details of a long-term share bonus scheme that could in future net directors hundreds of thousands of pounds on top of their basic pay.

Although much of the information in the report will not be new, British Gas is braced for political outcry when it is brought together and made public in a single document.

The company will then face the wrath of shareholders at the annual meeting at the end of May.

Mr Brown, who has already appeared twice before the Commons employment select committee on the issue of pay and bonuses, will be seeking shareholder approval for his re-appointment at that meeting.

The row over Mr Brown's pay coincided with a sharp increase in customer complaints. The Gas Consumers' Council said these soared to 5,246 in January, an increase of 172 per cent year on year. In the first three months of the year, complaints rose by 94 per cent, to 10,960. Ian Powe, director of the consumers' council, has warned that British Gas must work hard to regain consumer confidence before the market is opened up. He said that the January figure was an all-time high and compared with a previous monthly peak of 3,670 in 1998.