British Gas Profits Halve Amid Customer Shift to Discounted Energy Deals
British Gas owner Centrica has reported a dramatic near halving of its annual earnings, attributing the decline to a "challenging" year marked by unseasonably warm weather and a significant customer migration towards more affordable energy deals.
Financial Performance and Market Challenges
The energy giant announced underlying operating profits of £814 million for the 2025 financial year, a substantial decrease from the £1.55 billion recorded in 2024. Within its household energy supply business, earnings plummeted by 39 per cent to £163 million. This drop was primarily driven by an £80 million impact from milder temperatures, which significantly lessened demand for central heating across the UK.
Additionally, customers moving to fixed price products, typically at a discount to the standard variable tariff, reduced profitability compared to 2024, Centrica stated. The group now reports that nearly a third – 32 per cent – of its customers are on fixed price tariffs, an increase from 25 per cent at the close of the previous year.
Customer Growth and Strategic Shifts
Despite the profit downturn, Centrica achieved a notable milestone: growing customers across its retail arm for the first time in more than a decade. UK and Ireland household customer numbers increased by 1 per cent to 7.96 million over the year, with 7.5 million in the UK. This growth was partly boosted by acquiring 91,000 customers from failed suppliers Rebel Energy and Tomato Energy in 2025, which offset a small underlying decrease.
However, British Gas was overtaken by rival Octopus Energy as the UK’s largest household energy supplier last year, highlighting the competitive pressures in the market.
Investment Priorities and Market Reactions
Shares in Centrica fell 8 per cent as the company revealed it was pausing share buybacks to prioritise its investment programme. Chief executive Chris O’Shea emphasised that while trading conditions had been difficult, the supplier remained disciplined. "Pausing the buyback enables us to prioritise investment that creates lasting value for shareholders, while continuing to deliver reliable, affordable energy," he said.
The group plans to invest at least another £700 million in 2026, following a £1.3 billion investment in 2025 for a 15 per cent stake in the new Sizewell C nuclear power plant in Suffolk. This move underscores Centrica's commitment to long-term energy transition projects.
Broader Energy Market Context
The results come amid forecasts of a 7 per cent reduction in Ofgem’s energy price cap, with a predicted drop of £117 to £1,641 annually for a typical dual fuel household from 1 April. This follows Chancellor Rachel Reeves' announcement last November of a £150 cut to average bills by scrapping the Energy Company Obligation scheme.
Centrica's Rough gas storage site, located under the North Sea, reported lower-than-feared losses in 2025 and is expected to roughly break even in 2026. The government is currently reviewing the future of gas storage in the UK, with a decision anticipated in the first half of the year.
Analyst Perspectives
Aarin Chiekrie, equity analyst at Hargreaves Lansdown, commented: "British Gas owner Centrica’s headline numbers were a tough read as energy markets adjusted to more normalised conditions." He noted that the planned annual investments of £600-800 million through 2028 could strain cash flows if returns are not as high or quick as expected.
Overall, Centrica's performance reflects a turbulent period for the energy sector, balancing customer affordability with strategic investments in a rapidly evolving market landscape.
