Cutting jobs sends British Gas into loss of pounds 365m: Restructuring costs pounds 1.6bn as job losses rise to 25,000

BRITISH GAS plunged to a pre-tax loss of pounds 365m - its first as a privatised company - after announcing restructuring charges of more than pounds 1.6bn and an increase in job losses from 20,000 to 25,000 over the next five years.

The average cost to the company for each employee made redundant will be pounds 52,000, including pension payments. The job losses, most of which will be implemented within three years, are the result of a reorganisation of the UK gas operations into five separate businesses.

Cedric Brown, chief executive, said he could not rule out further job losses because of uncertainties clouding the company's future. These include a forthcoming decision by Ofgas, the industry regulator, on how much British Gas will be able to charge other gas suppliers, including electricity companies and North Sea producers, to use its pipelines.

Donald MacGregor, of the GMB general union, said: 'British Gas are playing the money markets at the expense of jobs. How can it make sense to set aside pounds 1.7bn to make skilled workers redundant?' Mr MacGregor, the union's national secretary for energy workers, said it would fight 'tooth and nail' any plans for compulsory redundancies.

The shadow trade and industry secretary, Robin Cook, said: 'The 25,000 redundancies announced by British Gas will cost the public purse an extra pounds 200m a year in unemployment costs and lost taxation.

'The last thing that Britain needs now is the loss of another 25,000 skilled posts. It is up to British Gas to ensure that they strike a 'no compulsory redundancy' deal, as British Telecom has done.'

British Gas's loss in the year to 31 December compares with a profit of pounds 1.05bn in 1992. Before the restructuring costs operating profits increased from pounds 8.6bn to pounds 8.7bn as higher returns from exploration and production offset a squeeze in profits in domestic gas supply, where prices and market share have fallen under pressure from Ofgas, the industry regulator.

The dividend is 14.5p, up from 14.2p a year ago. The shares fell 11p to close at 328p.

Mr Brown said the increase in the number of job losses followed a decision in December by the Government to end the British Gas monopoly over domestic and other small customers earlier than expected in 1996, phasing in full competition by 1998.

Kenneth Clarke, the Chancellor, said the gas industry was typical of the situation where one section of industry was shedding jobs to become more efficient, while new jobs were being created in others.

'If we get our gas and electricity prices down, it does not only mean that the VAT increase will have no significant impact on consumers, it also means that the rest of British industry will benefit from having some of the lowest energy costs in Europe,' he told BBC Radio 4's World at One programme.

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