British Gas predicted to reach record profits – report

British Gas’ profits are expected to reach record levels because of Ofgem’s increased energy price cap, according to reports.

British Gas, the UK’s largest energy firm, is on course to report profits of £857m over the first six months of trading this year, according to Investec. UBS, however, has predicted a slightly lower figure of £687m.

Centrica, the company’s owner, has already reported that the supplier’s interim profits will significantly exceed the previous record of £585m set in 2010, although it has not yet provided an exact figure. The surge in profits would represent a remarkable increase compared with the £98m earned during the same period in 2022.

Centrica is also expected to sustain its own robust earnings, having recovered from pandemic-driven losses after posting a £135m loss in 2020. 

The company explained this as a result of Ofcom’s increase in the energy price cap, a measure that aimed to compensate suppliers for setting it too low in the past and recognised the rising wholesale market prices caused by the Covid-19 pandemic and the Russian invasion of Ukraine.

Currently, the regulator is said to be considering the possibility of raising the fixed 1.9 per cent margin for profits, with a variable rate of around 2.4 per cent margins from October.

Martin Young, equity and utilities analyst at Investec, predicts that British Gas’ massive profits will inevitably trigger “a media frenzy about energy prices”, as the typical household energy bill could remain around the current level at around £2,000 per year through the third quarter of 2024.

While this is “slightly lower than our previous estimates, it’s hardly a respite”, he argued.

Cornwall Insight has also predicted the price cap will remain well above pre-crisis levels into next year, prolonging the UK’s cost of living crisis.

The news has come months after Shell revealed it had achieved a nearly $1.7bn (£1.4bn) profit increase in 2022, compared with experts’ predictions, because of rising energy prices. Other companies in the sector also obtained record-breaking profits in 2023, with BP making around £500m more than originally predicted. 

The enormous profits made by fossil fuel companies has been criticised by activists. In May, Just Stop Oil protesters clashed with drivers as they staged marches in central London to demand further climate action from oil giants. 

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