Water industry: Now they say the coffers are dry

Ordered to slash bills, the utilities are planning to cut jobs rather than dividends. Are their environmental pledges also at risk?

ast month Brian Duckworth, managing director of Severn Trent Water, received a watch to commemorate 25 years' loyal service with the company. He was joined by 200 co-workers, some of them now close friends, who all started careers at the then public utility in 1974.

Just three weeks later, many of those 200 faithful workers now face losing their jobs. There is every chance they will because Duckworth, who began life at Severn Trent Water Authority as an accountant on pounds 3,000 a year and now earns pounds 175,000, has announced plans to lay off 1,100 staff, almost one-fifth of the workforce.

The Severn workforce is not alone. Up to 10,000 jobs could be sacrificed as water companies fight to keep their profits and preserve bosses' pay in the face of pressure to cut costs for the consumer. Among those cutting jobs are Pennon, owner of South-West Water, laying off 200; Hyder, owner of Welsh Water and Swalec, axing 1,000; Anglian, 400; and Yorkshire, 500.

For 10 years, since privatisation, the companies have turned water into wine. They have been the darlings of the City, with much of the money raised by more than doubling bills given away in dividends worth more than pounds 10bn to shareholders. Now the stuff of life has turned to blood. The bosses are fighting to keep their profits, their own pay and shareholders' dividends as they bow to pressure to cut customers' bills.

What has created this change of fortunes has been the decision by Ofwat, the industry regulator, to demand price cuts for household bills of an average of pounds 30 - or 12 per cent of the annual bill. The response of the largest companies has, on the whole, been swift and remarkably violent. The price to be paid is the loss of up to a quarter of the industry's workforce in an attempt to slash operating costs.

Mr Duckworth insists: "I do like to think of Severn Trent as a big family where we share problems together. But this is a difficult time. There are likely to be many people I know who are faced with losing their jobs over the next two to three years."

Next year Midlands householders will see their water bills drop from an average of pounds 231 to pounds 193, a saving of 14 per cent. That represents a loss of revenue to Severn Trent of pounds 120m.

But on Friday Michael Meacher, the environment minister, said there was no justification for the job losses given the strength of the water companies' balance sheets.

Adam Scorer of the Consumers' Association said: "The price cuts are justified because water is the second most profitable sector on the stock exchange. Dividends have risen 50 per cent since 1994-95. But the water price to consumers has gone up constantly. There have been no cuts. There is no question that a clawback for consumers is justified. We have been offered nothing from the companies, which are low-risk, high-profit monopolies, to show us that price cuts necessitate job cuts. There is nothing to say these cuts cannot be funded out of dividend payments."

Pete Bowler, of Water Watch, points to the unfolding of the week's events as proof of the failure of privatisation. "Fat-cat directors are putting their bonuses ahead of running a public utility for the benefit of the communities they serve," he said. "Privatisation was entirely unnecessary."

Over the past decade Water Watch has logged a series of incidents of water pipe leakages and potential environmental disasters, which, it claims, lays bare the myth that privatisation has led to a massive improvement in services. It claims that water companies which have reduced staff since privatisation often no longer have workers on site to monitor water treatment plants around the clock.

The privatised companies, however, contend that enormous investment programmes have seen improvements in the quality of tap water and an easing of environmental problems. Even Ofwat concurs. Already pounds 30bn of profits have been ploughed back into the industry as investment since 1990, and Ofwat is demanding another pounds 15bn investment in the next five years.

The question now is whether the privatised companies deliver on those environmental promises at a time when it is cutting staff to the bone. Next year a draft Bill imposing restrictions on water extraction from rivers, and new responsibilities for the conservation of water, will put further pressure on the utilities.

Duckworth, who is chairman of Water UK, the umbrella organisation which represents water companies' interests, says: "The last thing a business wants to do is make decisions about cost reductions when they have an impact on customer services or the environment. We will work hard to make sure the environment is not put at risk."

The environmental impact of the cuts is a prime concern for Unison, which represents some 25,000 of the 40,000 workers in the industry. The union is now calling on Ofwat to ensure the water companies undertake a risk- assessment before laying off workers in vital areas.

"Some time down the line something will happen at one of those sewage works, or there will be a major flood," claims Alex Thomson, Unison's head of water. "At some stage something will give and there will be a serious health risk. And if these jobs go, can they [the water companies] guarantee there will be no risk to people from the water supply?"

But Ofwat's demand for reductions next year has provoked Unison's fury. It is demanding urgent talks with Michael Meacher, and a political storm is brewing over the timetable for the bill reductions, as well as the water companies' determination to shed jobs rather than reduce dividends. The row will add to the problems of John Prescott, whose Department of the Environment is in overall charge of the industry.

"We think the way the price cuts are being structured is wrong," said Mr Thomson. "The one-off price cut, followed by a gradual increase, was always going to mean that companies would just obliterate jobs. People are looking for stability rather than just having another pounds 30 in their pocket. [In July] we went to Michael Meacher and Ofwat to say we are concerned about jobs. We warned them the price review would lead to huge job losses."

But Ofwat is determined to bring in the price reductions. Pete Bowler, at Water Watch, says: "Certainly for the first eight years of privatisation, Ian Byatt [the regulator] had his balaclava on back-to-front - the wool was over his eyes."

Ofwat supporters believe Mr Byatt has finally seen the light. An Ofwat spokesman says: "Over the past five years prices have risen and yet 5,000 jobs have been shed. And now they say we have to shed jobs because prices are coming down. It doesn't make any sense."

News
people
News
A survey carried out by Sainsbury's Finance found 20% of new university students have never washed their own clothes, while 14% cannot even boil an egg
science...and the results are not as pointless as that sounds
News
Dominique Alderweireld, also known as Dodo de Saumure, is the owner of a string of brothels in Belgium
newsPhilip Sweeney gets the inside track on France's trial of the year
News
Cumberbatch was speaking on US television when he made the comment (Getty)
people
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
Life and Style
ebookNow available in paperback
ebooks
ebookPart of The Independent’s new eBook series The Great Composers
Life and Style
tech
Arts and Entertainment
Tom DeLonge, Travis Barker and Mark Hoppus of Blink-182 pictured in 2011.
musicBassist Mark Hoppus and drummer Travis Barker say Tom Delonge is 'disrespectful and ungrateful'
Sport
football
Arts and Entertainment
Olivia Colman and David Tennant star in 'Broadchurch'
tvBroadchurch series 2, episode 4, review - contains spoilers
Sport
cyclingDisgraced cycling star says people will soon forgive his actions
News
Britain's Prince Philip attends a Garden Party at Buckingham Palace in London
people
Arts and Entertainment
Ed Sheeran will play three sell-out gigs at Wembley Stadium in July
music
News
i100
News
Lena Dunham posing for an official portrait at Sundance 2015
people
Arts and Entertainment
Under the skin: Sarah Kane in May 1998
theatreThe story behind a new season of Sarah Kane plays
Arts and Entertainment
Preening: Johnny Depp in 'Mortdecai'
filmMortdecai becomes actor's fifth consecutive box office bomb
Sport
Bradford City's reward for their memorable win over Chelsea is a trip to face either Sunderland or Fulham (Getty)
football
News
Lars Andersen took up archery in his mid thirties
video
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs General

    Recruitment Genius: International Customer Service Administrators

    Negotiable: Recruitment Genius: This is an exciting opportunity to join an awa...

    Recruitment Genius: Warehouse Operations & Logistics Manager

    £38000 - £42000 per annum: Recruitment Genius: One of the UK's best performing...

    Recruitment Genius: GeoDatabase Specialist - Hazard Modelling

    £35000 - £43000 per annum: Recruitment Genius: Our award-winning client is one...

    Recruitment Genius: Compressed Air Pipework Installation Engineer

    £15000 - £21000 per annum: Recruitment Genius: This leading provider of Atlas ...

    Day In a Page

    Woman who was sent to three Nazi death camps describes how she escaped the gas chamber

    Auschwitz liberation 70th anniversary

    Woman sent to three Nazi death camps describes surviving gas chamber
    DSK, Dodo the Pimp, and the Carlton Hotel

    The inside track on France's trial of the year

    Dominique Strauss-Kahn, Dodo the Pimp, and the Carlton Hotel:
    As provocative now as they ever were

    Sarah Kane season

    Why her plays are as provocative now as when they were written
    Murder of Japanese hostage has grim echoes of a killing in Iraq 11 years ago

    Murder of Japanese hostage has grim echoes of another killing

    Japanese mood was against what was seen as irresponsible trips to a vicious war zone
    Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

    Celebrities call on David Cameron to take more Syrian refugees

    One young mother tells of torture by Assad regime
    The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

    The enemy within

    People who hear voices in their heads are being encouraged to talk back
    'In Auschwitz you got used to anything'

    'In Auschwitz you got used to anything'

    Survivors of the Nazi concentration camp remember its horror, 70 years on
    Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

    Autumn/winter menswear 2015

    The uniforms that make up modern life come to the fore
    'I'm gay, and plan to fight military homophobia'

    'I'm gay, and plan to fight military homophobia'

    Army general planning to come out
    Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

    What the six wise men told Tony Blair

    Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
    25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

    25 years of The Independent on Sunday

    The stories, the writers and the changes over the last quarter of a century
    Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

    Homeless Veterans appeal

    As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
    Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

    Smash hit go under the hammer

    It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
    Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

    The geeks who rocked the world

    A new documentary looks back at origins of the computer-games industry
    Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

    Belle & Sebastian is taking a new direction

    Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea