The water regulator for England and Wales has expressed concern about the financial state of companies responsible for providing water to over 20 million customers in the south-east of England. This comes as there is increasing frustration among the public regarding the industry’s performance in terms of services and pollution.
The most recent report from Ofwat regarding the financial stability of the industry once again identified Thames Water, Southern Water, and SES (Sutton and East Surrey) Water as companies that must take measures to improve their long-term financial health.
The regulatory body expressed worries about the financial well-being of South East Water, a company serving 2.2 million customers. This has resulted in the company being placed in the “requires action” category, which includes companies with the lowest scores for financial resilience in the industry.
The decision to include South East Water alongside Thames, Southern and SES means the company will be subjected to extra scrutiny from the regulator. This year it emerged that South East spent more on dividends and servicing its debt pile over the past two years than investing in infrastructure.
According to a study by the University of Greenwich, the company spent £232m on disbursing dividends and covering interest on its debts between March 2020 and March 2022. In contrast, they invested £179.8m in enhancing infrastructure, such as replacing pipes and improving water supplies.
The business, which caters to clients in Kent, Sussex, Berkshire, and Surrey, faced criticism during the summer when 6,000 households experienced a week-long water shortage. It enforced a hosepipe restriction and attributed the high demand to the rise in people working from home.
The water regulator Ofwat has placed South East Water in its “requires action” category due to the growing financial pressures and a decline in operational performance.
The CEO of the regulating body, David Black, stated that companies should have enough financial flexibility to handle fluctuations and fulfill their responsibilities to customers and the environment.
He stated: “In cases where we have noticed potential issues, we have also observed some businesses taking action to address the problem. We anticipate them to continue striving towards enhancing their financial stability.”
“An interesting development can be seen in the situations of Yorkshire Water and Portsmouth Water, which were previously listed as needing intervention. They have actively taken steps and have now been reclassified from our lowest category. We anticipate other companies will also demonstrate similar progress and we will diligently track their advancements.”