How Yorkshire Water just keeps rolling along

Anyone who watched the Panorama programme on Yorkshire Water the other night would be left wondering why on earth heads haven't yet rolled at this beleaguered utility. The programme said nothing new about the region's water shortage problems, but as only television can, it summarised the case against Yorkshire and its seemingly inept management in terms as devastating as they come. In part, the answer to why top management is still in place is the remarkably sanguine view investors have of this extraordinary situation.

The City has never been good at taking an interest in anything that happens north of Watford, not unless it has pound signs written all over it anyway, but given what a widely-held stock Yorkshire Water is, you might expect at least some concern. Not so if a straw poll of fund managers conducted yesterday is anything to go by. The company may have failed to get its message across to its customers and industry regulators, but in the City its explanation for the water shortages - an act of God and geography - is widely accepted.

Even the painful financial effects of the drought on the company - it is costing pounds 3m a week to tanker in water from elsewhere while the extra investment needed to make sure this never happens again might ultimately cost hundreds of millions - seems to have passed largely unnoticed; over the past year Yorkshire Water shares have exactly tracked the sector. As far as the stock market is concerned, therefore, the company's problems are neither here nor there. So long as the profits and dividends keep rolling in, and the monopoly franchise is safe, who cares what customers think?

A public inquiry is being conducted into Yorkshire's water shortage problems and it is possible this will reflect better on manamagement than Panorama's hatchet job. Failure to anticipate last summer's drought was understandable enough, after all. Even so, there is no doubt that a company that has lost the faith and goodwill of its customers, even when it has the privilege of monopoly, is in serious trouble. It is hard for incumbant management to climb back from the sort of public relations disaster Yorkshire has suffered. Customers need some outward sign that things have, and will, change. That usually means new people in the top jobs. It may be unfair, but it is also the way of the world.

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