Npower, one of big six energy firms, is to cut 900 jobs, as the company warned it would make significant financial losses this year.
The German-owned supplier blamed the cuts, about 15% of its UK workforce, on the government’s price cap on default tariffs and “intense competition” in sector over fixed deals.
Npower said about 900 roles would go over the coming year and that it would consult staff over the next month.
The company’s chief executive hit out at what he described as unsustainable pricing by challenger firms, nine of which have collapsed in the past year as wholesale costs increased.
Paul Coffey said: “The retail energy market is incredibly tough. Ofgem forecasts that five of the big six energy companies will make a loss or less than normal profits this year owing to the implementation of the price cap. And with several recent failures of new energy suppliers, it is clear that many have been pricing at levels that are not sustainable.”
The cap took effect on 1 January, and Ofgem has said it expects the savings to be around £1bn for consumers, making a significant dent in large suppliers’ revenues.
The regulator is expected to announce an increase in the level of the cap next week, potentially adding nearly £100 to the annual bills of 11 million households on default tariffs.
Coffey said npower was still forecasting “significant losses” this year, even after the savings from a reduced workforce bill. Innogy SE, its German owner, has already warned that keeping npower could hit overall group profits by as much as €250m (£218m) in 2019.
Npower had hoped to merge with the retail arm of fellow big six firm SSE, but the deal collapsed in December after they failed to agree on how much capital to inject into the new supplier.
Instead, ownership of the business is to be transferred to E.ON as part of a complex asset swap between Innogy and the rival German energy company. There are fears this could lead to more job losses when the transfer takes place later this year.
Unions said Thursday’s announcement of job cuts were “grim news” and warned of more losses across the industry. Unison’s Matt Lay said: “It’s just the tip of the iceberg – npower isn’t the only firm struggling. The UK’s entire retail energy market is broken and in need of an urgent fix.”