Industry denies water profits are Europe's highest

A dispute broke out yesterday after a union-sponsored group claimed the profit margins of British water companies are three to four times those of rival suppliers on the Continent.

A dispute broke out yesterday after a union-sponsored group claimed the profit margins of British water companies are three to four times those of rival suppliers on the Continent.

UK water companies could easily afford to charge lower prices by lowering their profits rather than cutting jobs, said a survey by Public Services International, a union-funded research unit. Profit margins of the French water group Vivendi averaged 9 per cent, it said. In the UK, where Vivendi owns three water companies in the South-east, they are 37 per cent.

But the industry body Water UK dismissed the findings and said the report had not compared like with like. Water charges in the UK were among the lowest in Europe, said Water UK, irrespective of profit margins. The water regulator, Ian Byatt, is preparing to announce cuts in water bills averaging 14 per cent - worth an average of £35 for the typical household. The water industry has warned that the price reductions could lead to as many as 9,000 job losses - one in four of the workforce.

But consumer groups claimed that the water industry could afford to cut bills by between 19 and 26 per cent.

The unions argue that lower bills should be at the expense of profit margins, not jobs. The trades union study compares the profit margins of eight of the biggest British water companies with those made by water suppliers in Hungary, Spain, Sweden, France and other parts of the world. It claims that profits as a percentage of sales are as high as 60 per cent at Southern Water although they are 7 per cent in Hungary, 19 per cent in Stockholm and as low as 2.4 per cent in France.

But Pamela Taylor, chief executive of Water UK, said the comparisons were meaningless. In Britain, the water companies own their assets, valued at £200bn, and have to fund the maintenance and renewal of that asset base from profits. On the Continent, water companies do not own the assets but manage water supplies for municipal authorities and charge a fee.

Water UK says water charges for an average domestic customer were £82 in London, £96 in Paris, £186 in Brussels, and £169 in Luxembourg. In Oslo, bills averaged £42.