Scottishpower earnings suffer from weak pound and warmer weather

● Underlying UK supply earnings down to £1.21 billion from £1.26bn

Weak sterling and a further outflow of customers have seen underlying UK supply earnings at energy utility Scottishpower more than halve.

Scottishpower, which is owned by Spanish group Iberdrola, said wider annual generation and supply earnings fell to £121.9 million, as customer numbers fell by 200,000, to 5.1 million. That profit compared to £240.3m in 2016.

The Scottish group blamed higher costs hitting UK electricity profit margins, while its gas division struggled in response to warmer weather in 2017.

The generation business posted earnings down 36 per cent at £23.4m, while the supply arm saw earnings of £98.5m compared with £203.6m last time. Scottishpower’s overall underlying earnings came in at £1.21bn for 2017, down from £1.26bn last time – a fall of £43.3m.

The news comes as the Big Six energy suppliers face the tough task of retaining customers amid fierce competition from smaller rivals and campaigns encouraging people to switch suppliers.

Scottishpower chief corporate officer Keith Anderson said: “As anticipated, generation and supply continued to face challenges, predominantly in light of increasing input costs, reduced demand, challenging market conditions and political uncertainty.”

Revenues at the UK supply arm tumbled 11 per cent to e4.9 billion (£4.3bn) in 2017. Ignacio Galan, chairman of Iberdrola and Scottishpower, said the UK was at a “tipping point” when it came to energy supply.

He said: “After 25 years of encouraging people to use less electricity, now we know that the best way to tackle climate change is to use more over the next 25 years.” The UK Government announced a shake-up of the energy industry last year by publishing draft legislation for a cap on “rip-off” energy tariffs.

However, Business Secretary Greg Clark refused to offer a guarantee that the flagship plans would be enforced by next winter. Scottishpower is among a number of major providers to pledge to end standard variable tariffs and move customers on to cheaper, fixed-price deals.

The Business, Energy and Industrial Strategy Committee said last week that there was a “clear lack of will” on the part of the Big Six to take the steps needed to address pricing problems.

The Iberdrola group booked a 4 per cent rise in net profit to e2.8bn (£2.5bn) despite its business in Spain facing challenging trading conditions.