As Centrica released its trading update yesterday it revealed the loss of almost a million British Gas customers.
What the update revealed most clearly was the pace at which customers abandoned the company – shedding 823,000 UK energy supply accounts between the four moth period between June and October 2017.
Centrica are attributing the loss to 650,000 customers taking part in a collective switch to ‘white-label fixed price and prepayment tariffs’.
The update went on to state that British Gas lost 150,000 customers because of market switching trends and the impact of the energy firm’s price hike in September.
Iain Conn, Centrica Group chief executive, said “Although some aspects of our delivery in the second half of 2017 have been disappointing, I remain encouraged by our progress in implementing our strategy. The balance sheet has been materially strengthened, and we continue to focus on improving our underlying performance.
“We have also provided a broad and definitive set of proposals this week to improve the UK energy market for customers and look forward to engaging with the Government and regulator in the coming weeks.”
Certainly, UK Government policy and Theresa May’s October pledge to clamp down on “rip-off” energy tariffs do not play into Centrica’s hands, but the glut began before then, as City Index point out.
Ken Odeluga, market analyst for City Index, said: “Centrica stock had already fallen 30% over the year up till last night’s close. Investors have been weighing how much of a new threat the toughening environment is to the group’s dividend policy.
‘Pay-outs are a sensitive subject after Iain Conn gutted the dividend soon after his arrival around three years ago.”
Despite 7.5% of their entire customer base leaving for what many assume to be smaller, fairer suppliers, some analysts believe that the loss of over 800,000 customers isn’t quite as toxic as it might first appear.
Speaking to Reuters, Roshan Patel, an analyst at Investec, said: “The block customers are not a big loss because they wouldn’t have been generating much profit. The biggest problem has been in the North American business side which is supplying energy to business customers.
“It has been hit by a combination of strong competition, pressuring margins and low volatility which means the company hasn’t been able to make as much money from trading.”
Yet, as Centrica prepare to see their biggest ever share loss, Morgan Stanley analysts believe the real fear is not what they lose, but for how long, saying: “The question now is whether this weakness will persist into 2018, and the longer term potential impact on the dividend.”