Home » UK Business News » British Gas reports 889 percent profit increase as cost of living crisis continues

British Gas reports 889 percent profit increase as cost of living crisis continues

By Hugh Fort in UK Business News, posted July 27, 2023

British Gas owner has reported a half-year profit increase of 889 percent in the UK.

However, the company says this is not as a result of high energy prices, but in fact a decrease in debt-related costs.

The company reported earnings of £969 million, up from £98 million last year.

Centrica, British Gas's owner, explained the energy regulator Ofgem's price cap includes an allowance for unrecoverable debt on energy bills, which is eventually written off.

This scheme brought in around £500m in the first half of the year.

This financial boost allowed Centrica to propose a 33 percent increase in its interim dividend, causing its shares to rise by over four percent.The company reported adjusted operating profits of £2.1 billion, up from £1.3bn during the same period last year.

This increase occurred despite a £250m loss from wholesale energy on household bills due to restrictions on supplier charges.

Last year, energy companies' profit margins were impacted when wholesale prices soared following Russia's invasion of Ukraine.

Despite a significant decrease in oil and natural gas costs, the energy price cap remains £1,000 above its pre-pandemic average. This cap includes a premium that allows suppliers to recover some of last year's losses, preventing potential supplier failures.

Industry experts predict that the cap will remain around the £2,000 a year average in the upcoming winter months, adding pressure to household budgets amidst the ongoing cost of living squeeze.

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A spokesperson for Ofgem said: "After four years of loss making, the energy retail sector is expected to return to profit this year.

"The profits we'll see in the energy retail sector for the first half of this year are a one off as suppliers recoup some of the genuine and significant costs and losses they incurred over recent years due to COVID and the Russian invasion of Ukraine.

"We expect profit levels to fall back significantly moving forward to the reasonable and modest levels allowed for in the price cap."

Simon Francis, co-ordinator of the End Fuel Poverty Coalition, told Sky News: "These profits are a further sign of Britain's broken energy system.

"At a time when household energy debt is spiralling to record levels and energy bills remain double what they were just a few years ago, the profits posted will be greeted with disbelief by those struggling through the crisis."

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