Energy giant British Gas has announced that it will be cutting gas prices by 5%, but the reductions will not come into effect until the end of next month.

Price reductions from 27 February will reduce the average energy bill by £37 a year, said British Gas.

Suppliers have come under increasing pressure to adjust prices to reflect the cost of wholesale gas, which has fallen significantly.

The move to cut prices by Centrica, the parent company of British Gas, follows the announcement by rival firm E.On to cut the cost of its standard gas tariff by 3.5%, which came into effect on January 13.

Centrica chief executive Iain Conn said: "We've been watching the significant moves in the international energy market extremely closely for some time, with the aim of helping customers with a price cut at the earliest possible opportunity. Operating in such a volatile market, no pricing decision is straightforward.

"We bear the responsibility of managing the risks of buying energy ahead on behalf of our customers, who value the predictability this brings."

The British Gas price cut will benefit 6.8 million customers, but they will have to wait until the end of next month to take advantage of it, despite January typically being the coldest month.

Wholesale gas prices, which generally move in tandem with oil prices, may be down by as much as 29%, according to some sources.