Ofwat curbs cost 350 jobs at Severn

BIRMINGHAM-BASED water giant Severn Trent is to cut 350 jobs after revealing today that it had come close to taking regulator Ofwat to the Competition Commission over demands for swingeing spending cuts.

Ofwat said last month that it would let Severn Trent raise its prices by 20% over the next five years, making its bills among the lowest in the country. That will bring in much less extra cash than it said it needs to invest in its infrastructure and meet environmental costs.

The company today said it believed Ofwat had 'gone too far' in demanding efficiency gains but after weighing up a lengthy referral to the Competition Commission, its substantially new board - led by chairman Sir John Egan, ex-president of the CBI, and chief executive-elect Colin Matthews, formerly of Hays and Transco - had decided not to challenge the regulator.

Severn Trent indicated that the price cap factored in £150m of capital expenditure cuts and a £15m reduction in operating costs over the next five years, and said it would have to cut staff numbers by 350, or 7%, to 4,650 as a result. That is on top of the 1,000 jobs it has shed in the past five years.

The company also said that Tony Wray, a former colleague of Matthews at gas group Transco, is the new head of its regulated water operations. Matthews has been running the water business for the past five months but steps up to group executive at the end of this month when Sir Robert Walker leaves.