British Gas will shed 20,000 jobs in big shake-up: Company to split into five divisions

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BRITISH GAS is to shed 20,000 jobs in a radical shake-up of its UK gas business.

The timing of the announcement surprised industry observers as the Government has yet to respond to the Monopolies and Mergers Commission report on the industry, published earlier this year, which recommended that British Gas divest its gas trading arm.

Under yesterday's proposals the company will abandon its present structure of 12 geographically-based businesses, splitting itself into five units based on function.

The new units are gas transportation and storage, public gas supply, contract trading, servicing and installation, and retailing. The global gas business and exploration and production are not affected.

Norman Blacker, director responsible for the UK gas business, denied the move was premature. 'We feel we need to clarify our position, particularly for employees,' he said. 'I believe that whatever the Government decides we will be able to meet their requirements with this company structure.'

The Government, whose response to the MMC is considered overdue, said yesterday that the issues were still being considered by Michael Heseltine, President of the Board of Trade, and an announcement would be made as soon as possible. A spokesman for British Gas, which is dismayed by prolonged uncertainty over its future, said: 'We want a decision by the year-end, and if one is not made we will be disappointed.'

Mr Blacker said the decision to split British Gas into five was taken entirely for business reasons and it was 'incidental' that it would facilitate divestment along the lines recommended by the MMC.

He said the changes were the most fundamental in the UK gas business for more than 40 years and were needed to combat tighter price regulation and increasing competition. The company has hinted in recent months that it may need to accelerate investment overseas to offset the effects of the tougher regulatory regime in Britain.

One of the main unions for British Gas employees, the GMB, warned the company against compromising on quality 'through an ill-conceived plan which trades jobs and standards for the international markets' profits'.

Donald Macgregor, secretary for the energy and utilities section of the union, said: 'British Gas will ignore its home market and its workforce at its own peril.'

Ofgas has published a consultative document on how British Gas should charge rivals, including North Sea companies, to use its pipes. The regulator wants full transparency in costs so that British Gas pays the same as any other gas trader.