Job cuts looming at British Gas: Consultants to review BG operations, writes Mary Fagan

BRITISH GAS has called in MacKinsey and Co, the management consultants, to conduct a sweeping review of its headquarters. The study is almost certain to recommend job cuts in the central organisation, which employs 3,500 including 2,500 research and development staff at six locations in Britain.

Cedric Brown, recently appointed chief executive, has asked McKinsey to assess virtually every central function and to report how the business could be run more efficiently.

Mr Brown oversaw a reorganisation of regional operations in 1991, resulting in the loss of 2,000 jobs, many of them in management. He told staff in personal letters: 'Clearly it is sensible to review all our activities from time to time to ensure that we are keeping pace with changing business requirements.' One company executive said: 'He has done it with the regions. Now it is the turn of headquarters to come under the microscope.'

Mr Brown said the review was being carried out within demanding time scales in order to quickly improve competitiveness. The company has shed 25,000 jobs over the past 10 years, and more cuts appear inevitable following the McKinsey review. The total workforce is 80,000, of which 74,000 are in the UK.

British Gas faces an uncertain future. The company is under investigation by the Monopolies and Mergers Commission, because it failed to agree with the watchdog, Ofgas, on terms to allow rival gas suppliers, including North Sea producers, to use its pipelines.

The company also faces the rapid erosion of its share of the industrial gas market - from 90 per cent to 40 per cent - following a report by the Office of Fair Trading. The OFT is also demanding that the pipeline system be hived off at arm's length from the trading arm of British Gas to ensure fair play for others who use the lines.

In addition, the Government intends to sharply reduce its monopoly over smaller customers and has said the monopoly may ultimately be removed.

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