Cut taxes to save North Sea, says Centrica

BRITISH GAS owner Centrica yesterday became the latest firm to cut its dividend after being hammered by the dramatic slump in oil prices.

The energy group said it would go ahead with slashing its annual pay out by 11pc, from 13.5p a share to 12p, in a blow to its 600,000 small shareholders as well as giant pension funds.

The company has been hit by the falling oil price – down from $115 in the summer of 2014 to around $34 last night – and has announced plans to axe 6,000 jobs by 2020.

Chief executive Iain Conn yesterday called on the Chancellor to ease the tax burden on oil producers to support the industry in the North Sea.

‘I think the stakes are quite high, hundreds of thousands of job are dependent on the North Sea,’ he said.

It came as Centrica reported a 12pc fall in operating profits to £1.5bn in what Conn described as a ‘very challenging year’.

And after huge write-downs related to its business in the North Sea, it posted pre-tax losses of £1.1bn.

British Gas fared well however, delivering a 31pc jump in profits to £574m, which drew criticism after it cut customer bills by an average of just £72 per household over the period.

Centrica said profits at British Gas appeared higher last year because of the level of investment made in 2014 and the lower levels of consumption that year compared to 2015. Plans to cut the dividend were first outlined last year as the company moved to guard against the falling oil price.

‘It was an extremely difficult decision to make,’ Conn said yesterday.

Conn said one particular area under ‘a great deal of stress’ was the North Sea.

‘The very simple thing is that the North Sea is getting old and the infrastructure is getting close to the end of its life,’ he said.

‘Costs have to be spread across a smaller number of barrels each year, meaning the cost per barrel is going up. We need to avoid infrastructure being abandoned early and be aware that jobs are rapidly going out of the supply chain and out of the companies that are producing.’ He called on the Government to ease the tax burden on oil producers – which can pay out up to 85pc of profits in corporation tax, supplementary charges and Petroleum Revenue Tax [PRT], depending on the age of the field.

Last year Centrica’s UK tax bill was £295m, £233m of which was corporation taxes, with £30m spent on PRT.

In last year’s Budget George Osborne pledged to ease the burden but Conn called for the Chancellor to go further. He called for corporation tax – set at 30pc for oil fields – to be brought in line with other industries, which pay 20pc.

He added: ‘If the industry is in such turmoil they should make the corporation tax rate normal. They can always raise taxes again at a later date.’

Centrica’s shares were up 6.85pc yesterday to 207.4p.