British Gas loses 340,000 more accounts

British Gas lost 340,000 customer accounts in the UK in the first half of this year, the chief executive of the firm's parent company has told the BBC.

The lost accounts represent about 270,000 customers.

However, Centrica chief Iain Conn said the rate of customer losses had halved since last year and he hoped numbers would stabilise.

His comments came as Centrica said operating profits at its consumer business had fallen by 20% to £430m.

British Gas is the biggest energy supplier in the UK. It still has 3.5 million customers on standard variable tariffs, which are often the most expensive.

However, that number is down from 4.3 million at the start of the year as the company has encouraged customers to switch to cheaper fixed-rate deals ahead of a cap on more expensive tariffs that is expected to come into force at the end of this year.

The way the cap is worked out will be published in August and will vary around the UK according to regional market conditions. It will be reviewed and reset by the regulator, Ofgem, every six months.

Mr Conn told the BBC he remained concerned that the cap would mean some customers would end up paying more.

"Prices may well bunch around the level of the cap so some of the cheaper deals in the market may disappear which means that some customers will end up paying more."

Instead he suggests ending the standard variable tariff as it now stands, so that no customer languishes forever on the same tariff but is prompted to change at some point.

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by BBC business editor Simon Jack

The continuing fall in customer numbers and the number of services they buy will be a disappointment to the company that has been trying to stem the decline by offering new services, including allowing customers to monitor and manage their energy usage through mobile phone apps.

That push towards connected services has seen some growth but if the acid test is whether customers want to stay with you - British Gas is failing.

Centrica is much more than just British Gas, of course - it also has businesses in the US and Europe but overall performance has been roughly flat.

Chief executive Iain Conn is coming under pressure from shareholders to improve the performance of the company. The share price has more than halved in the five years that he has been in charge.

He points to a collapse in oil and gas prices since 2013, ongoing regulatory probes, the expense of smart meter roll out and now the introduction of a price cap.

Despite this, he is convinced that growth is around the corner.

He will want that corner to come soon.

Part of the reason for British Gas losing customers is that it rarely appears among the cheapest deals on price comparison websites when customers look to switch suppliers.

Many of the cheapest deals are offered by the smallest suppliers owing, in part, to the fact that these firms do not have to pay the green taxes levied on the medium and large companies.

Mark Todd, of Energyhelpline - a price comparison website, said that there were now 80 suppliers in the market for domestic customers, so there was plenty of choice and switching was now an easy process.

He said that British Gas was "managing relative decline" by offering special offers and deals to existing customers. It was still the biggest domestic supplier - and would remain so even were SSE and Npower to merge as planned.

With no potential growth in the energy sector, instead British Gas was looking to dominate the home services sector, including boiler cover and smart thermostats, he said.

More than four million British Gas customers' bills increased at the end of May.

Mr Conn told the BBC: "We have to monitor all the drivers of costs and energy prices and we aim to keep our tariffs competitive. Our prices are well below the average of the other large suppliers.

George Salmon, equity analyst at Hargreaves Lansdown, said: "Centrica's standard variable tariff currently has bills of around £1,100 a year on average.

"While that means the group is far from the worst offender in the eyes of the regulator, it's not beyond the realms of possibility that Centrica will have to cut prices by 5-10% at a time when wholesale energy costs are rising. That's not a good combination for profits."

Shares in Centrica were down by nearly 5% in morning trade.