Centrica is to cut a further 5,000 jobs as the lossmaking UK energy supplier seeks growth after several years of mass redundancies, profit warnings and dividend cuts were worsened by the coronavirus crisis.
Half of the job cuts announced on Thursday will come from leadership, management and corporate roles as Chris O’Shea, who took over from Iain Conn as chief executive in March, seeks to simplify the energy group behind the British Gas brand.
The latest redundancies add to 12,500 jobs slashed since 2015 in an effort to save £2bn by 2022. Centrica on Thursday said it hoped the latest restructuring would allow it to achieve that £2bn target one year early.
Centrica has been hit hard in recent years by an explosion in competition within the UK energy supply market, as smaller rivals with lower cost bases have attracted customers with cheaper deals.
Its margins were also hit by the introduction last year of an energy price cap for 11m households, while the pandemic has increased pressure on the sector, with suppliers reporting rising bad debts and a significant drop in demand from businesses forced to close during the UK lockdown. Centrica had already put 3,800 staff such as meter readers on furlough leave.
Investors and analysts have long questioned Centrica’s strategy, introduced by Mr Conn after he joined the group from BP in 2015. Mr Conn chose to concentrate on Centrica’s customer businesses, including energy supply and “smart” devices such as thermostats that can be controlled remotely from a phone. He sold off large power plants, wind farms and oil and gas production assets.
Under Mr O’Shea’s restructuring, Centrica will have fewer business units and all will report directly to him, stripping out layers of management. Half of the 40-strong senior leadership team will depart by the end of August, including Sarwjit Sambhi, head of Centrica’s “consumer” unit, and Richard Hookway, head of Centrica Business.
Mr Sambhi had been viewed as one of the main contenders for the top job before the appointment of Mr O’Shea, who was previously finance director.
Mr O’Shea also plans to tackle Centrica’s many types of employment contract — it currently has about 80 separate agreements.
“Since becoming chief executive almost three months ago, I’ve focused on navigating the company through the Covid-19 crisis and identifying what needs to change in Centrica,” he said.
“We’ve learnt through the crisis that we can be agile and responsive in the most difficult conditions and put our customers at the heart of our decision-making. 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.”
The latest job cuts are likely to put the new chief executive on a collision course with unions.
The GMB on Thursday vowed to “fight for every single job”, saying: “Slashing thousands more jobs is not the answer. You cannot just cut your way out of a crisis.”