Water jobs to be cut after watchdog ruling

Thursday, January 28, 2010

Britain’s water companies may have to cut thousands of jobs as executives draw up plans to meet stringent new price controls set by Ofwat, the industry regulator.

A deadline for Britain’s 21 water companies to appeal against the Ofwat ruling — which sets the amount that they can charge households and invest in network upgrades over the next five years — expired last night. All but a handful have chosen to accept the settlement, triggering what industry experts believe will be a string of redundancies to cope with sharply reduced investment.

United Utilities, one of the largest British water suppliers, with almost 9,000 staff, has said already that it would cut 500 positions by the end of March. Pennon, the owner of South West Water, has also refused to rule out compulsory redundancies to drive down costs. Thames Water and Anglian are among other companies thought to be considering cutting staff in some administrative roles.

Richard Laikin, water specialist at Ernst & Young, said that these would be merely the opening salvoes as the industry scrambled to adjust to more austere spending. “It’s inevitable that these companies are considering headcount reductions,” he said. “Ofwat is effectively asking them to find 10 per cent to 15 per cent overall efficiency savings ... Different companies will find different ways to achieve that, but clearly cutting headcount will play an important role.”

Ofwat’s final decision in November called for an average cut in household bills of 1 per cent by 2015. The water companies had asked for an average increase of £31.

Britain’s 21 regulated water companies employ about 40,000 staff directly, while tens of thousands more are employed through subcontractors. One industry insider estimated that job losses across the industry would total “several thousand”.

A spokesman for Thames Water, which supplies 8.5 million customers in the South East, said that contractor companies “would probably bear the brunt” of the reduced spending.

The company is being forced to scale down a key pipeline replacement programme of London’s Victorian sewer network. Yesterday it dropped plans for a legal challenge against Ofwat to the Competition Commission.

Martin Baggs, interim chief executive of Thames Water, said: “Ofwat set us a particularly tough challenge, but there have been some welcome changes from the draft and we will get on and deliver the agreed plan.” Thames plans to spend almost £5 billion on the network over the next five years, down from £5.5 billion.

Only Bristol Water, which was limited to a 7 per cent rise in bills when it asked for a much bigger increase — has publicly announced plans to appeal to the Commission.

This story was featured on The Times website.

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