The impact of business Article icon


Centrica, parent company of British Gas, has rarely been out of the headlines in recent years as complaints about oblique pricing structures and rising energy bills have focused media attention on its profits.

So last month the energy group took a proactive stance, unveiling its inaugural Centrica UK Economic Impact Report, in association with Oxford Economics, that calculated it made a £14.1 billion contribution to Britain's gross domestic product in 2012 - equivalent to the size of the economy of the City of Manchester.
Centrica directly contributes £3.7 billion. And for every £1 billion that it directly contributes to UK GDP, a further £2.9 billion is generated through multiplier impacts.
Julian Mears, head of group media relations, denies that the report was an attempt to deflect attention from Centrica's profits announcement, released just days later. 'We always need to make sure that we are contextualising the results,' he explains. 'That is where the idea for a business impact report comes from. In a positive way, we are trying to broaden the debate about the contribution the business makes to society. Big business can be good business, and business does create wealth for the economy.
'The overall response has been very positive. It is inevitable that we faced some criticism for the report, but it also served as useful mitigation when it came to our profits, so it achieved its objectives in that sense. It was never intended to make news in and of itself but to inform the debate.'
Oxford Economics found that Centrica's UK activities support 174,000 jobs and generate tax payments equivalent to £158 for every household. 'Centrica UK pays £800 million in tax, but more than £1 billion in total. We are about the 30th biggest company in the FTSE 100, but the sixth biggest tax payer,' explains Mears. 'We employ 33,100 people directly, but we have a significant impact indirectly. The firms that we employ in our supply chain have an impact.'
The report also dispels any myths about regional bias. 'People assume that the headquarters is where all the money goes,' says Mears. 'This is quite far from the truth. There are 380 local districts in the UK, and we source goods and services in 377 of these from more than 6,000 companies.'
The figures are not guesstimates but are derived from Centrica's audited accounts for 2012.
Responsible business
'I think that, where it can, business should do more to explain and talk about its impact and to be proud of that. We need to engage in the debate about profits and try to put context around what we do,' adds Mears. 'It doesn't matter whether you produce energy or CDs, you produce profits and support jobs. We have a responsibility to talk about these things.'
When Centrica announced operating profits up 14 per cent to £2.74 billion in 2012, including an 11 per cent rise to £606 million at British Gas, senior management took to Twitter to engage with critics. 'Why don't you front up the debate as a business? You provide a focal point for the feedback,' explains Mears. 'It is only when you are profitable that you can make investments. We made total investments of £2.7 billion last year, including £2 billion in the North Sea. All our profits are reinvested.'
The company is investing £1.5 billion in the Cygnus Gas Field, which will provide enough gas for 1.5 million homes, and create 4,000 jobs in the supply chain. 'Most of that spending will benefit UK companies,' says Mears.
But he acknowledges that consumers are still some way from accepting that British Gas should make profits. 'We need to talk to people about what makes up their bills in the first instance. Just five per cent of an energy bill is profit. It is what we do with that five per cent contribution that is important. It is all invested into gas and energy in the UK. We have to secure supplies for the future,' says Mears. 'When people look at British Gas' profits, they think it is a lot of money. But we have a lot of customers and the margin is relatively small. We are starting to explain that it not just about pounds and pence.'
Centrica itself
• Centrica contributes £3.7 billion to UK GDP
• 33,100 people work for Centrica spread across 52 different local authorities in Great Britain
• £1.1 billion in tax receipts paid by Centrica and its staff
• Centrica's employees are 2.25 times as productive in terms of GDP contribution as the UK average
Centrica's supply chain
• 6,000 UK companies supply inputs of goods and services to Centrica
• 80,000 jobs are supported by Centrica's procurement from its supply chain
• Centrica's purchases of inputs generates an estimated £7.8 billion contribution to UK GDP
• £1.6 billion in tax payments resulting from Centrica's procurement from UK-based fi_x001F_rms
Wage consumption impacts
• 61,000 jobs are supported by Centrica's staff and those in its direct supply chain spending their wages at retail and leisure outlets
• £2.6 billion in GDP created by Centrica's direct and supply chain staff spending their wages
• £1.4 billion in tax receipts from Centrica's staff and those in its supply chain spending their wages
• 174,000 jobs are dependent on Centrica
• £14.1 billion GDP is supported by Centrica
• £4.2 billion in tax payable to the Exchequer is supported by Centrica; equivalent to £158 for every UK household

  *as of 2012