Unions braced for job losses at United Utilities

Unions fear that 2,000 job losses may be announced today at United Utilities, the company formed by North West Water's pounds 1.8bn takeover last year of Norweb, the regional electricity firm.

There was also speculation yesterday that the group might dispose of its retail operations, which have a substantial high street and superstore presence in the North-west. City sources said that the most likely route for such a disposal would be a management buyout.

United Utilities declined to comment, but the group is expected to make an announcement to the Stock Exchange this morning. Shares in the company rose 19p to 597p.

Commenting on the rumours, one City analyst said: "The merged operation will have big restructuring costs. Hefty job cuts seem inevitable at some stage."

He added: "They do not seem to have made much progress so far in integrating the business or on delivering the reductions in cost."

Last year Norweb had about 7,600 full-time equivalent employees, 2,000 of them in retail operations - a business the company had pursued energetically.

North West water had a similar workforce, including over 5,000 in the core water and sewage business.

Unions fear the job cuts might be in addition to reductions on the retail side. City analysts said that a combination of 2,000 redundancies with a retail disposal would be viewed by investors as aggressive.

In November, the group warned that there would be a shake-up in the combined operation, which finally came into being on 1 January.

Brian Staples, then chief executive of North West Water, said:"We're going to completely redesign the group. The idea is to create more non- regulated earnings."

The company has already made progress on that front, with a recent 20- year agreement to operate water and sewer services for North Brunswick in the state of New Jersey in America.

Mr Staples also said that United Utilities should be able to deliver real dividend growth of 8 per cent or greater, against the 7 per cent real growth promised by North West alone.

Mr Staples had earlier angered consumer groups by saying that if the takeover went ahead, shareholders would see the first benefits from any savings from job losses and rationalisation over the rest of the decade.

He said that for the first five years, the money would go to shareholders as higher dividends, and only after the year 2000 would customers begin to see any effect on their bills, spread over five years.

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