London briefing: New man in hot seat at British Gas

The vacancy for one of the toughest, and most politically-sensitive, jobs in British business has just been filled, with the appointment of insurance industry veteran Mark Hodges as the new head of British Gas.

Hodges takes up his post in June and will walk straight into a highly-charged investigation into the energy industry, amid accusations that British Gas and other suppliers are ripping off their customers.

News that an outsider has been chosen for the hot seat came as a surprise in the City. He has spent his entire career in the insurance industry – after more than 20 years at Norwich Union and Aviva, he moved to the insurance broking group Towergate, quitting in 2014 after three years.

One of Hodges’ top priorities at British Gas will be to rebuild customer numbers. The business has come under fire for its poor service levels and lost almost 400,000 customers last year, as they switched to other, cheaper suppliers.

Along with the rest of the “Big Six”, which together control more than 90 per cent of the UK’s energy supply market, British Gas stands accused of not passing on the full benefits of cheaper oil prices.

Pay package

Hodges will be well-rewarded in his new role. If he beats performance targets, he will be in line for a bonus of up to twice his £625,000 (€867,256) base salary and, on top of that, is being offered a long-term incentive package worth up to a further three times his salary, again, subject to performance.

In total, his package adds up to getting on for £4 million (€5.55 million) and will undoubtedly spark anger among consumer groups, politicians and other critics of the group.

The appointment of Hodges was announced by Centrica, which owns British Gas. Centrica chief executive Iain Conn is a new boy himself, having joined the company from BP at the start of this year, and is no doubt pleased to have secured someone to share the flak. Conn appears unconcerned at Hodges' lack of experience in the sector, saying his new hire has a "strong understanding" of the UK consumer market, a good track record in improving performance and experience of working in a regulated market.

Insurers are not particularly popular with their customers but Hodges should start bracing himself for a whole new level of scrutiny – probably starting with his pay package.

His new boss didn’t mention it, but presumably another of Hodges’ qualifications for the role is a very thick skin.

Billion Dealz

The changing patterns of consumer spending were underlined yesterday as the discount retailer

Poundland

, which trades as Dealz in Ireland, revealed it had pushed sales through £1 billion a year for the first time.

Boosted by the opening of 60 new outlets, sales increased by over 11 per cent in the year to end March, taking them to £1.11 billion. Excluding new stores, sales were up by 2.4 per cent and chief executive Jim McCarthy said he expects profits to be in line with City expectations of £43.8 million.

The £1 billion sales landmark was overshadowed by problems with the group’s £55 million takeover of the rival one-price retail chain, 99p Stores, which would add another 250 outlets to the Poundland empire.

The Competition and Markets Authority (CMA) says the combination of the two chains would reduce competition in as many as 80 locations where both companies have a store. For the deal to go ahead, Poundland could be forced to close or offload stores.

McCarthy has ridiculed suggestions that Poundland would push up prices once the 99p Stores deal goes through and, to be fair, “101p-land” doesn’t have quite the same ring to it.

Poundland has until Thursday to present its case to the CMA for the deal to go ahead without restrictions.

Many analysts support McCarthy’s view that the CMA is taking too narrow a view of the sector in which Poundland and its rival operate. Rather than viewing the two companies as part of the narrow single-price retail sector, the deal should be considered against the background of the burgeoning discount market, which now takes in Aldi, Lidl and the bargain ranges of all the major supermarket groups.

Fiona Walsh is business editor of theguardian.com