Financial News

  • 1 August 2014, 15:17

Centrica Boss Urges UK To Remain In Europe

The UK benefits from being a member of the European Union (EU) and should remain part of a reformed economic bloc, the head of Britain's biggest energy supplier said on Thursday.

Speaking to Sky News, Sam Laidlaw, chief executive of Centrica, said that it would be a "great pity" if an eventual referendum on the EU membership resulted in the UK's departure.

"The UK needs to be part of Europe, but Europe equally needs to become more competitive and that's the discussion currently going on," he said.

Mr Laidlaw, who will step down in December after eight years at the helm of the owner of British Gas, also said that there would be negligible costs associated with a Yes vote in September's Scottish independence referendum.

"Scottish Gas is an important retailer and we have a lot of customers, but most of our production is in English waters.

"Those would have to be segregated and it will have some cost but it won't make a material impact to our business."

The Centrica chief was speaking on the day that the company announced a 40% slide in first-half pre-tax profit to 895m.

At British Gas's residential arm, which has 11m UK customers, operating profit fell by 26% to 265m, which it attributed to the mild British winter and a squeeze on margins.

Ofgem, the energy regulator, issued figures on Thursday forecasting that the six biggest energy suppliers would double their margins over the next 12 months, which prompted an incredulous response from Mr Laidlaw, who said the average dual-fuel customer would see their bill fall by 90 this year.

"Bills are already lower this year, profits are lower and prices are lower," he said, adding that further price reductions were unlikely given the backdrop of events in Ukraine and regulatory uncertainty.

"If you look at next winter, gas prices are up 50% on where they are today," he added.

"There are other components of the bills which are not spoken about, such as transport and distribution costs, and environmental levies which are continuing to go up, which makes further bill reductions unlikely."

Mr Laidlaw, who said that he had not thought about his next move after he leaves Centrica, said the threat of a post-general election energy price freeze raised by Ed Miliband, the Labour leader, was acting as a disincentive to investment.

"It has clearly unnerved investors - you see that in share prices - but it has also unnerved rating agencies," he said

"There is heightened political risk and that does affect us in terms of investment.

"In the long run if there is less investment it has an impact on bills and energy security."

The prospect of prolonged Russian sanctions was unlikely to have a significant effect on Centrica, according to Mr Laidlaw, referring to its gas supply deal with Gazprom, the Russian energy group.

They were, however, likely to drive up gas prices in Europe.

"It is too early to speculate how much," he said.

The Centrica chief also argued that further tightening of the rules on foreign takeovers of UK companies were not desirable, saying that the UK had benefited from being an open economy.

"The commitments to the country in terms of creating jobs or research and development are the measures on which you should consider these things," he said.

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