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United Utilities ignites jobs row

Employment: Political uproar as utility lays off thousands of workers, but expansion plans bring some good news for Wales and Ulster

A political row erupted yesterday following news of 2,500 job losses at United Utilities, the company formed by North West Water's pounds 1.8bn takeover of Norweb, the regional electricity firm. The lay-offs compare with 800 previously projected and will be largely in the core water and elecricity operations.

Ian McCartney, shadow employment minister, attacked the planned cuts as "a slap in the face for thousands of hardworking employees". He added: "United Utilities is among the most profitable utilities in the country, and there is absolutely no need for these redundancies. Yet again the taxpayer is to be landed with a huge bill for unemployment benefit as employees are sacrificed to give a quick fix to the balance sheet."

Brian Staples, chief executive, said: "It's regrettable and we do not like it. But it is a fact of life in the industry today. The best people across both businesses will go forward with the group."

The job cuts in the core businesses emerged alongside plans to dispose of the group's retail, contracting and process equipment divisions, which employ about 4,000 in the UK and elsewhere. United also intends to pull out of power generation, an activity inherited from Norweb, which the new ownership feels is too small to be "meaningful".

United also hinted that it might seek further acquisitions in its drive to be a super-utility. The company said: "Ways are being explored of extending the group's utility activities into Europe whilst at the same time watching with interest the continued rationalisation in Europe."

The group said that the savings from the Norweb merger would be pounds 140m a year by the end of the decade, about 40 per cent more than had been originally thought.

Earnings enhancement in 1996/97 will also exceed expectations and real dividend growth of 11 per cent per annum is "possible".

United will make a provision of pounds 104m this year, largely to cover severance costs. Gearing at the end of the year will be 90 per cent, rising to 100 per cent next year but quickly falling back to between 75 and 80 per cent. The planned divestments, which the group said could take some time to achieve, could cull a further 10 per cent.

The move was broadly welcomed among City analysts. But some warned that United still faces the uncertainty of price control reviews at the end of the decade by two watchdogs, Ofwat and Offer. According to one analyst:"There is not much to get worked up about here except what appears to be a strategic decision to retrench into the core utility operations." The group's shares moved up 14p to 611p.

Separately, Calor Group yesterday warned of redundancies to come, and British Rail's engineering development unit announced job losses.

Calor, Britain's biggest supplier of bottled gas, warned more than 300 workers at its Slough headquarters, close to London, that there would be redundancies following a decision to close the office by next year. The move forms part of a plan to redistribute head office functions between existing regional offices and a new customer management centre to be established this year near Leamington Spa in Warwickshire.

The company refused to give further details ahead of a preliminary results announcement due this morning, but the business is known to be facing difficulties.

British Rail's engineering development unit is to close by the autumn with the loss of 58 jobs. BR had hoped to sell the Derby-based unit, which specialises in development of prototype rail vehicles.

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