Water firms hike dividends despite sewage pollution scandal and rising bills

Pennon, Severn Trent and United Utilities all increased payouts to shareholders, despite all three being embroiled in a scandal over water pollution.

Water firms are looking to hike customer bills over the coming years (Alamy/PA)

England’s three biggest listed water companies have hiked their dividend payouts to investors and announced more than £700 million in profit, despite rampant sewage pollution and substantial planned rises in bills.

London-listed Pennon Group, Severn Trent and United Utilities all released their financial results for 2023-2024 in the last week, revealing a combined £710 million in profit.

The firms risk angering MPs, campaigners and consumers by increasing shareholder dividend payments while all three are embroiled in a nationwide scandal over water pollution.

Sewage spills into England’s rivers and seas more than doubled in 2023.

According to the Environment Agency, there were 3.6 million hours of spills last year – equal to about 400 years – compared with 1.75 million hours in 2022.

Despite this, Severn Trent will hike its final dividend payout by 9% to 70p per share, while United Utilities said it will lift the dividend by 9.4% to 33p per share. It said the increase was part of a policy to raise dividends in line with inflation.

South West Water owner Pennon said a decision to trim its dividend to 44p – a less than 1p cut – showed “we are listening”.

However, the payout was still 3.8% higher than the previous year.

Pennon in particular has faced anger this week after a parasitic outbreak in Devon made hundreds of people ill and landed two people in hospital.

More than 16,000 households and businesses in the Brixham area have been told to boil their drinking water since May 15 after cryptosporidium was found in the water supply.

Cryptosporidium is a waterborne disease which can cause symptoms such as diarrhoea and vomiting.

Pennon said it was most likely triggered by animal faeces entering a damaged pipe.

But all three companies have been in the limelight over the issue of sewage spills of late.

North West provider United Utilities faced reports last week that millions of litres of raw sewage were pumped into Lake Windermere in the Lake District.

Documents from United Utilities seen by the BBC showed that a pumping station fault left sewage being illegally pumped into the famous lake for 10 hours in February.

The situation was labelled a “scandal” by opposition politicians, while Downing Street said it was “completely unacceptable”.

Earlier this week, United Utilities reported a 17.5% rise in profit to £517.8 million for the last financial year.

And Severn Trent profits rose by a fifth to £201.3 million, despite sewage spills by the company surging by a third in 2023.

The company, which provides water for people in the Midlands, was responsible for more than 60,000 spills last year.

Severn’s chief executive Liv Garfield also faced criticism this week for being awarded a £3.2 million pay packet last year.

Nonetheless, all three want to hike bills in the next five years.

According to Ofwat, the water regulator, United Utilities wants to increase average bills by 25%, Pennon’s South West Water by 20% and Severn Trent by 36%.

Ofwat will make preliminary decisions on the business plans on June 12.

The increases could further damage consumer trust in water companies, which already risks being “irreversibly damaged”, according to an annual survey by the Consumer Council for Water.

Customer satisfaction with companies’ handling of wastewater and the environment has plummeted to 35%, compared with 88% a decade ago.

The three companies provide water for 15 million people across England.

Thames Water, the country’s biggest provider, is privately owned and has not yet announced its results.