Crackdown on water firms to hit dividends

WATER firms have been hit with the toughest crackdown on profits and dividends since they were privatised under margaret Thatcher 30 years ago.

The restrictions imposed by industry regulator ofwat mean investors in Severn Trent, United Utilities, Pennon group, Thames Water and others will receive smaller payouts.

ofwat has also ordered the companies to slash annual household bills by £50 on average, reduce leaks and pollution and better prepare for the impacts of climate change – hitting their profits.

The industry faces growing anger for paying out mammoth dividends despite rising bills and a failure to meet basic standards.

Rachel Fletcher, ofwat’s chief executive, said: ‘Today we’re firing the starting gun on the transformation of the water industry.

‘now companies need to crack on, turn this into a reality and transform their performance for everyone.’

Water companies in England and Wales were privatised under Thatcher’s Conservative government in 1989, through the sale of ten regional water authorities.

But bills have increased by 40pc since then and the firms have come under sustained criticism for a litany of failures, including water shortages, river pollution and vast leakages.

At the same time, they have paid out £56bn in dividends to shareholders and racked up £52bn in debt, analysis by the University of greenwich found.

It prompted researchers to suggest the companies had funded their ‘consistently high’ investor payouts by borrowing.

And they accused water firms of passing on the costs of debt interest payments to customers in the form of higher bills.

Thames Water announced it was scrapping its dividend for two years in 2018 following controversies under former owner macquarie. In a decade, the company paid investors £1.6bn in dividends, borrowed nearly £11bn, ran up a £260m pension scheme deficit and paid no corporation tax.

It was also fined £20m in 2017 for dumping raw sewage into the River Thames and criticised for using a structure that had subsidiaries in offshore tax haven the Cayman Islands.

Southern Water, which paid £190m in dividends in 2016 and 2017, was separately charged £126m this year for dumping untreated water and ‘deliberately’ mis-reporting data.

However, in its latest price review for 2020 to 2025 ofwat said companies would be required to take greater account of customers’ interests.

It has also ordered them to rein in executive pay – after water fat cats were handed £58m in just five years.

A spokesman for industry body Water UK said firms were considering ‘the implications of this tough price review’.