Blog Post

British Gas loses 2% of customers and profits hit record low due to pandemic and increased competition

Richard Simmonds • February 26, 2021

British Gas has seen its full year earnings fall by over a third and its owner, Centrica recorded a £577 million pre-tax loss due to the challenges posed by the Covid-19 pandemic and increased competition.

Earnings fall by a third

The fall in demand for electricity and gas during the hot summer months of 2020 combined with the forced closure of businesses up and down the country due to the Covid-19 lockdown measures impacted heavily on British Gas’ income.

The energy supplier’s full year earnings were shown to have fallen by more than a third to £80 million a sharp contrast to the record annual profits of £742 million it recorded a decade earlier.

The introduction of the energy price cap and the opening up of the UK energy market to more competition has weighed heavily on British Gas but despite that, it remains the nation’s largest energy supplier.

Falling earnings and a decline in customer numbers led to Centrica launching a second turnaround programme in five years to alleviate the damage. However, these plans have angered many of its employees who since the start of the year have carried out strike action.

Also read: British Gas recorded a 15% decline in electricity demand among UK businesses due to Covid-19 and more strike action on the way

Losing customers

British Gas has also confirmed that its customer numbers have fallen by another 2% taking the total to 6.9 million last year.

Increased competition from smaller energy suppliers was the main driving factor for such a decline further displaying just how competitive the energy supply market has become.

Relatively poor customer service scores in comparison and higher tariffs than those offered by smaller suppliers also played their part.

Also read: How to Improve Consumer Trust in Energy Suppliers?

Pandemic Problems

The Covid-19 pandemic also impacted Centrica as it caused a collapse in global commodity prices resulting in the company having to pay a £1.6 billion impairment charge and suffering a pre-tax loss of £577 million.

Centrica’s has lost three-quarters of its market value after its share price plummeted from an all-time high of more than 400p in 2013 to a record low of just over 32p a share last year. The company has crashed out of the FTSE 100, slashed shareholder dividends twice since 2015, and last year promised to cut 5,000 jobs.

As a result, Centrica’s CEO Chris O’Shea announced that he will launch a major transformation of the company, just a year after it completed a five-year turnaround plan which was launched by former boss Iain Conn in 2015.

“It won’t be easy. Our journey to transform has only just started, as we seek to restore shareholder value by improving customer experience, retention and employee engagement while maintaining a strong balance sheet,” said O’Shea.

The company said that the issues faced by the company could continue throughout 2021 as negative headlines caused by the staff strike led by the GMB trade union and its decision to hike energy prices impact.

The decision to raise prices on its of its standard variable tariffs could result in more customers jumping ship to cheaper alternatives.

Also read: British Gas becomes the first large energy supplier to hike prices after price cap increase, others expected to follow

Dyball Associates will keep you informed of the latest changes and our team of energy market consultants can guide you through the steps to enter the UK energy market. Whether you’re looking for electricity and gas systems or support on starting an energy supply company, Dyball Associates can help.