Defiant British Gas to press ahead with split

A defiant British Gas yesterday pledged to continue with its proposals to split the business into two parts by early next year despite the Draconian price review proposals unveiled by Ofgas earlier this week. The news came as fears over the pricing review and a disappointing set of first-quarter results sent the shares down another 14p to 174.5p.

Richard Giordano, chairman, said: "I can confirm that since we made public our intention to pursue this demerger it has become progressively more apparent that the demerger is clearly in the best interests of our shareholders, customers and employees."

Philip Rogerson, executive deputy chairman-elect, said the Ofgas price review covering the TransCo pipeline business "just means a little more work" in bringing the demerger to fruition. Further fuelling widespread expectations that British Gas will refer the Ofgas proposals to the Monopolies and Mergers Commission, Mr Rogerson said: "If it had been an MMC inquiry into the gas supply business, it might have been a different matter."

Any monopolies investigation might start at the beginning of August and go on for six to nine months, he said. "My fondest hope is that the outcome of a monopolies inquiry would be no worse than the regulator has proposed. So shareholders would be in possession of the final regulatory proposals by the time they have to approve the demerger next year."

The comments came as the group unveiled pre-tax profits cut from pounds 954m to pounds 933m in the quarter to March. Despite a boost from the colder winter weather, increased competition and higher interest charges dragged the results lower.

Investment Column, page 20