Water companies are paying ‘unsustainable’ dividends while threatening customers with higher bills to plug leaks and stem sewage spills.
United Utilities and Severn Trent – the two FTSE 100 suppliers – have showered shareholders with inflation-proofed payouts in recent weeks.
But the cash has been paid from their reserves rather than profits, which have been hit by rising costs and high debt interest payments. The practice, which has been going on for several years, is allowed by Ofwat, the water watchdog.
Pennon, the other quoted water company which also pays dividends from reserves, reports its results later this week.
‘This can’t be sustainable,’ said Jamie Woodward, professor of physical geography at Manchester University.
‘Unsustainable’: Critics argue that water companies have prioritised dividends over investment since the industry was privatised 30 years ago
It comes as regulators face a grilling from MPs tomorrow over water firms’ plans to raise household bills by £156 a year by 2030 to pay for upgrades and cut discharges.
Critics say customers should not have to foot the bill, arguing water companies have prioritised dividends over investment since the industry was privatised 30 years ago.
Severn Trent said it was ‘very comfortable’ with the amount by which profits cover dividends, which averaged 1.2 times over the last decade.
United said it was committed to raising dividends in line with inflation to give ‘a stable and predictable approach’ to long-term investors who back its ‘ambitious plan’ to invest billions of pounds.