Despite confirming that FY2005 earnings would be in line with expectations, Centrica has warned that soaring wholesale gas prices are likely to lead to increased tariffs for British Gas retail customers and more job cuts at the firm.

Centrica – owner of the gas supplier British Gas – said that fears over tight gas supply and an exceptionally cold winter had exacerbated an already difficult wholesale gas situation.

The company said that the impact of its most recent round of price increases had been less severe than anticipated, thanks to new product offerings being unveiled to customers and increased marketing spend. Nevertheless, Centrica expects the British gas residential supply business to make an operating loss in H2 2005.

Looking ahead, the group is to maintain its focus on driving down costs, with further job cuts likely between now and the close of next year.

Our pricing policy remains to recover fully the wholesale cost of energy from our customers over time, recognizing both the level and volatility in the forward curve and the competitive dynamics of the market. Following the extraordinary rises experienced in November, the wholesale cost of gas for Q1 2006 has recently been around 40% higher than it was when we adjusted our retail prices in September, Centrica’s statement said.