Shares in Centrica were down on the FTSE 100 in morning trading after the energy company issued an update in which it predicted 2011 earnings growth at a "more modest" rate than previously expected.

The group said that worldwide energy markets had been "turbulent" following a combination of unrest in North Africa and the Middle East and natural disasters and a nuclear crisis in Japan.

In addition forward wholesale prices of gas and power for delivery in winter 2011/12 in the United Kingdom stand 25 per cent higher than last winter, however the group said that end-user prices are not yet reflected by this.

Market conditions in Centrica's residential energy supply are "significantly more challenging than in 2010" the group said, with residential gas consumption in the first four months of the year down 19 per cent from a year ago, while electricity consumption dropped four per cent, thanks mainly to warmer weather.

As well as facing lower levels of consumption Centrica said that it was facing non-commodity costs, relating to transmission, metering and environmental obligations.

However Centrica did say that had seen a rise in residential energy accounts to almost 16 million, slightly above the figure reached at the end of 2010.

In an outlook statement, Centrica commented, "Centrica's integrated business model has become more robust against volatility in energy prices. Nevertheless the effectiveness of our economic hedge has been partially reduced by the UK Government's increase in tax rates for oil and gas production. With the resultant reduced cash flow and increased fiscal uncertainty, we no longer expect to maintain the previously projected high levels of investment in the UK. On new nuclear build, any impact on the investment schedule should be clearer following the publication of the interim report from the Office for Nuclear Regulation, due this month.

"For the Group as a whole, increased pre-tax profits from our UK upstream business are expected to more than offset lower profits from the UK downstream business and from storage. We continue to expect growth in our 2011 group earnings but at a more modest rate than anticipated at the time of our last results announcement as upstream profits have become more highly taxed. The full year outturn remains subject to the usual variables, particularly retail margin recovery and weather."

By 09:05 shares in Centrica were down 3.33 per cent on the FTSE 100 to 305.00 pence per share.

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