CMI Brief: British Gas
British Gas is Britain’s largest supplier of energy, yet the company has struggled, having lost over 75% of its market share in the last five years and having dropped from the FTSE 100 to the FTSE 250 earlier this year. The decline in market value and profits comes as a result of several factors, with Chris O’Shea, the CEO of parent company Centrica criticizing Theresa May’s 2019 price cap on electricity and gas for the decline in revenues. In 2019 British Gas accrued unprecedented losses of £849m, starkly contrasting with 2018 profits of £987m. The challenges facing the firm have only grown as a result of Covid-19, bringing to light the necessity of a downsize in management.
For the past few months, British Gas has sought to solve their managerial issues and boost productivity through a “fire and rehire” plan, which involves offering new contracts to British Gas workers with increased working hours, less holidays, and a 15% cut in pay. This has been met with significant backlash from British Gas engineers, as the majority have been working for the company for over a decade. GMB strikes protesting against these changes have been ongoing for nearly 9 months, yet the company is adamant about the direction they want to take the company, despite many engineers who had dedicated their working lives to the industry feeling left out in the cold.
This week marks the end of the grace period that British Gas had allocated to their workers in deciding whether or not to sign the new contracts, and it has been reported that up to 500 individuals will lose their jobs. Many other engineers have chosen to sign the new contracts; however, GMB national secretary Andy Prendergast has criticized these decisions as occurring “under duress”.
Given the oversaturation of the job market as a result of the pandemic, it is easier for large companies to implement contentious employment regulations in order to retain revenue, as workers who are willing to work longer hours for lower pay are not far and few between. Centrica in particular has been previously criticized for leveraging its monopolistic market share in the electricity and gas industry to price their products higher than competitors, and it is this same aspect of market vastitude which has allowed British Gas to undercut workers. Currently, British Gas still maintains the most expensive gas contact compared to other British competitors, suggesting that the cap on electricity and gas combined with more inelastic consumer tendencies has revealed the true business failures of British Gas and Centrica on the whole, being disadvantaged by diseconomies of scale and unnecessary levels of managerial hierarchy rather than inflated incomes on lower levels.
Cutting labour costs and downsizing may help to revamp the company’s image on paper, but the social significance and backlash from the way in which Centrica has chosen to disadvantage frontline workers is highly important in this day and age. The recent Uber Supreme Court ruling has showcased the value of workers rights and protections, with the court specifically highlighting the need to protect vulnerable workers, referencing their dependency on Uber as a platform. In the case of British Gas, most of the workers as well as the GMB Union seem to be highly dependent on British Gas and Centrica with GMB stating that although they will continue their protests, there is ultimately nothing they can do, exposing a gap between contemporary attitudes towards workers protections and large scale changes in real terms across the board. With the increasing importance placed on CSR and ESG, it is increasingly evident that a firm's values and wider social effects are more of growing importance for consumers, so it will be interesting to see how industries and firms will reconcile economic growth and revenue with growing advocacy for firm transparency and ethical working practices.
Graphics Credit: https://www.expressandstar.com/news/uk-news/2021/03/25/fresh-wave-of-strikes-from-friday-by-british-gas-engineers/