South West sets £30m charge to cover 400 more redundancies

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The Independent Online
South West Water is to cut 400 jobs over the next 15 months in addition to 100 job losses announced last year. The company said that it would take a charge of £30m against profits in the current financial year to cover redundancies and the closur e of premises in Plymouth and Truro.

One industry source said that a further 200 jobs may go if the company fails to win its battle for a relaxation in the price controls set by the regulator, Ofwat, last year.

South West is the only one of the big 10 water and sewerage companies to have rejected the Ofwat price cap, opting instead for the matter to be referred to the Monopolies and Mergers Commission. South West had argued for a price cap of inflation plus 8 percentage points for the five years to the end of the decade, compared with Ofwat's decision to impose a cap of "RPI plus one".

Keith Court, chairman, said the latest job cuts took into account the changing circumstances facing the company. "Whatever the outcome of our current reference to the Monopolies and Mergers Commission, we must plan for a reduced annual capital expenditure programme and continue our cost savings wherever they can be achieved. As we have made clear, if there is no change to the determination proposed by Ofwat, more jobs could be lost," he said.

Of the redundancies announced yesterday, 100 are in engineering and 170 in the operations divisions. The remainder are in support services and in the Exeter headquarters.

Until now South West has had one of the most lenient price control regimes because of its relatively high expenditure on water quality and the environment. The company believes that it needs to spend about £1bn a year until the end of the decade, much o f it on meeting coastal water standards. However Ofwat argues that it can achieve what is necessary within an annual budget of £500m.

Although South West privately thinks it unlikely that it will get all it asks from the MMC, the company is hoping that there might be some compromise.

The commission is due to deliver its report by 28 March at the latest.