Scottish Gas owner to cut 5,000 jobs in restructuring bid to save £2 billion

● More than half the cuts will come from leadership roles ● Chief executive regrets difficult decisions taken to save firm

Scottish Gas owner Centrica is to slash 5,000 jobs this year as part of a “significant restructure” of the struggling energy giant in a bid to save £2 billion.

Chief executive Chris O’shea said he regretted the “difficult decisions” that had to be taken as he tried to slim down the ailing company, which posted a £1bn loss last year.

More than half of the job losses will come from the business’s leadership roles, as Centrica - which is also the parent company of British Gas - revealed it would strip out three layers of middle managers in a bid to cut bureaucracy. The company, which employs 2,500 people north of the border, told The Scotsman it could not yet say how many of the jobs - if any - would be lost in Scotland.

Mr O’shea said: “I truly regret that these difficult decisions will have to be made and understand the impact on the colleagues who will leave us.

“However the changes we are proposing to make are designed to arrest our decline, allow us to focus on our customers and create a sustainable company.”

In addition to the proposed new organisational design, the company said it would also start consultations to “simplify terms and conditions for employees in the UK”. Centrica has over 80 different employee contracts, each with multiple variants, with many of the agreements dating back over 35 years.

The GMB union vowed to fight the cuts, with spokesman Justin Bowden saying: “A combination of the (energy price) cap and too little, too late management decisions have left a once proud brand crippled and weak. Slashing thousands more jobs is not the answer. You cannot just cut your way out of a crisis.”

Although it is still by far the biggest energy supplier in Britain, British Gas has been squeezed by increased competition in recent years.

Customers have been dropping away from the six biggest suppliers on the UK energy market, and experts hailed 2019 as the year that the group’s stranglehold on the market was finally broken for good.

Centrica’s rival, Perth-based SSE, saw its retail arm snapped up by one of the smaller challengers, Ovo Energy, which only entered the market a decade ago.

However, last month Ovo announced that it would axe 2,600 roles at the combined business, as the coronavirus pandemic speeded up its restructuring plans. Much the same has happened at Centrica, where the need to restructure and find a new path forward has been accelerated by the crisis.

Mr O’shea, who took the chief executive role just three months ago after holding the position of finance director, said the Covid-19 outbreak has shown Centrica can be responsible to its customers’ needs.

“However, I believe that our complex business model hinders the delivery of our strategy and inhibits the relentless focus I want to give to our customers,” he said.

“We have great people, strong brands that are trusted by millions and leading market positions, but the harsh reality is that we have lost over half of our earnings in recent years. Now we must bring focus by modernising and simplifying the way we do business.”

The cuts include around half of the 40-strong senior leadership team, who will step down by the end of August. The chief executive post was vacated in March when the company finally parted ways with former boss Iain Conn, who had announced his plans to leave as early as July last year.

Alongside Mr Conn’s departure, Centrica also appointed a new chairman, Scott Wheway.

Most of the restructuring is expected to happen in the second half of this year, Centrica said.

It hopes to make around £2 billion worth of efficiency savings by 2021.

The industry has faced a varierty of pressures, including the government’s energy price cap. The government’s cap on energy prices came into force at the beginning of last year, promising to bring down bills for customers on default tariffs. The firm in April announced a pay freeze for non-customer facing staff, amid a fear of plunging energy demand amid the coronavirus lockdown. It said it was seeing an increase in demand for energy among households as Britons have been forced to stay at home, but it added that it was being hit by a “more significant” impact from falling business energy use.

As well as the pay freeze for many staff, the group is deferring all employee cash bonuses, scrapping its final shareholder dividend payout to bolster its finances and halting spending on non-essential projects.

It had already axed executive bonuses for 2019 earlier this year.

“The changes we are proposing to make are designed to arrest our decline, allow us to focus on our customers and create a sustainable company”

CHRIS O’SHEA