Thames Water, which is already facing regulatory action and heavy fines for missing leakage and customer service targets, is seeking to cut its workforce by a quarter.
The dramatic cuts at Britain's biggest water company will result in 1,200 job losses over the next four years and Thames warned that it could not rule out compulsory redundancies.
Employees were given the shock news yesterday in an e-mail from Thames's chief executive Jeremy Pelczer, who said the company needed to make further efficiency gains. "This may lead to a headcount reduction of up to 25 per cent by early 2010. To put that in context, it would mean an average of around 300 people per year," he wrote. Thames employs about 6,000 workers and has 13 million customers.
The job cuts at Thames are far greater than those announced by any other water companies. But a spokesman denied they were linked to the impending sale of the business by its parent company, RWE of Germany. Thames is expected to be bought by a private equity firm. Failing that, RWE has said it intends to float the company.
Mr Pelczer said: "Any business has to be more efficient than its competitors in order to secure a long-term future. I have to guard against any complacency towards customer service or efficiency that may arise because we are a monopoly. As we seek to drive the efficiencies needed to meet our goals, some of them will come through smarter procurement but some will come from different ways of working which will involve job cuts."
The GMB union, which revealed the job-cutting plan, said it would seek to ensure that no front-line jobs were cut and that investment to improve customer service continued.
Kelly Rogers, a GMB official, added: "We will also seek an assurance that there will be no compulsory redundancies. The GMB wants proper and meaningful consultation on this matter."
But Mr Pelczer said he could only commit to keeping compulsory redundancies to "a minimum" by redeploying staff, seeking voluntary redundancies and using Thames' own staff rather than agency workers where possible.
Thames would not say where the job cuts would be made. A spokesman said: "We are not commenting on what types of jobs will go but we can guarantee that customer service will improve. We are realigning the company to focus on customer service and achieve the targets set by Ofwat."
The company pledged that the job cuts would not prejudice its commitment to meet its new leakage targets. In June, the company agreed to spend an additional £150m of its own money to speed up mains replacement work after missing its leakage reduction targets last year. The company escaped a fine.
However, Ofwat announced last month that Thames would face a fine of up to £140m for failing to meet guaranteed customer standards. Ofwat said the precise size of the fine would be decided once an investigation by Ernst & Young into Thames was complete. The accountants were sent in five months ago after irregularities were discovered in the customer service performance information Thames was supplying to the regulator.
The standards that Thames has failed to meet are understood to relate to guaranteed response times to complaints and billing enquiries, the keeping of appointments, interruptions to supply and sewer flooding.
Under the new five-year price controls which took effect last year, Thames has to reduce its £487m annual spend on operations by 3 per cent a year.