Job cuts at British Gas


Industrial Correspondent

British Gas has cut 5,000 jobs this year as part of its previously announced 25,000 losses and is expected to raise its target for redundancies by thousands more.

The company is dogged by increasing competition in the gas supply market and by costly long-term contracts with North Sea producers. These contracts, most of them agreed when British Gas was the sole supplier, mean the company is being forced into buying hundreds of millions of pounds worth of gas which it cannot then sell.

British Gas denied rumours that it is poised to announce 5,000 fresh job cuts, which would bring the total to 30,000. A spokeswoman said that the company, whose interim results will be announced on Thursday, is unable to comment further. Some City analysts expected provisions this year in the region of pounds 100m related to the "gas bubble" dilemma.

According to one observer, British Gas is at present locked into buying pounds 300m to pounds 400m worth of "excess" gas over the next few years. The company's share of the commercial and industrial gas market, where competition is allowed, has been whittled away by rivals.

It is concerned that the public gas supply business,which will be gradually opened to competition from early next year, will suffer a similar fate. The problems have been exacerbated by falling gas prices. British Gas is thought to be buying at about 19p a therm under its long-term deals while gas is available on the spot market for about 9p. The high price paid by British Gas could also accelerate the rate at which it loses market share.

British Gas not been helped by the mild weather in recent months, and by delays with some new gas-fired power stations. Longer term, there are hopes that the export market will open up with the completion of a pipeline to the rest of Europe in 1998. But analysts point out that this coincides with the Government's target date for a complete opening of the UK public gas supply market.

There are attempts to renegotiate some of the long-term contracts with offshore companies, some of which have strongly resisted the move. But some progress may be made if British Gas agrees not to offload contracts to existing or future gas supply subsidiaries. Such a move, which has been considerd by British Gas, would open up producers to considerable risk.

There is a view that the future for the company's supply operations is far from secure and could ultimately fail or be sold. Investors will be watching on Thursday for positive news on the dividend.

In September, British Gas said that it would seek to increase the divident as soon as possible. But some analysts now expect the payout at half time to be flat at 6.4p.

Start your day with The Independent, sign up for daily news emails
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Payments Operations Assistant

£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

Recruitment Genius: Telephone Debt Negotiator

£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

Guru Careers: Communications Exec / PR Exec

£25 - £30K: Guru Careers: We are seeking a highly-motivated and ambitious Comm...

Guru Careers: Pricing Analyst

£30 - 35k: Guru Careers: We are seeking a Pricing Analyst to join a leading e-...

Day In a Page

On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back
Thurston Moore interview

Thurston Moore interview

On living in London, Sonic Youth and musical memoirs
In full bloom

In full bloom

Floral print womenswear
From leading man to Elephant Man, Bradley Cooper is terrific

From leading man to Elephant Man

Bradley Cooper is terrific
In this the person to restore our trust in the banks?

In this the person to restore our trust in the banks?

Dame Colette Bowe - interview
When do the creative juices dry up?

When do the creative juices dry up?

David Lodge thinks he knows
The 'Cher moment' happening across fashion just now

Fashion's Cher moment

Ageing beauty will always be more classy than all that booty
Thousands of teenage girls enduring debilitating illnesses after routine school cancer vaccination

Health fears over school cancer jab

Shock new Freedom of Information figures show how thousands of girls have suffered serious symptoms after routine HPV injection
Fifa President Sepp Blatter warns his opponents: 'I forgive everyone, but I don't forget'

'I forgive everyone, but I don't forget'

Fifa president Sepp Blatter issues defiant warning to opponents
Extreme summer temperatures will soon cause deaths of up to 1,700 more Britons a year, says government report

Weather warning

Extreme summer temperatures will soon cause deaths of up to 1,700 more Britons a year, says government report
LSD: Speaking to volunteer users of the drug as trials get underway to see if it cures depression and addiction

High hopes for LSD

Meet the volunteer users helping to see if it cures depression and addiction
German soldier who died fighting for UK in Battle of Waterloo should be removed from museum display and given dignified funeral, say historians

Saving Private Brandt

A Belgian museum's display of the skeleton of a soldier killed at Waterloo prompts calls for him to be given a dignified funeral