MPs criticise Severn Trent Water for prioritising dividends over infrastructure investment

Local MPs including Shaun Davies and others have written to Severn Trent Water (STW) to criticise the company for prioritising dividends and bonuses over crucial investments in infrastructure that would benefit both customers and the environment.

This letter follows the alarming issues highlighted in this week’s Panorama program.

In July, Secretary of State Steve Reed made it clear that under this government, water companies must be held accountable for their performance in serving customers and protecting the environment.

Shaun Davies MP said: “Our water system is in urgent need of reform, and the government has announced the largest independent review of the water industry since its privatisation. This review will tackle sewage dumping and pollution, while also focusing on improving infrastructure, resilience, and driving economic growth. It is crucial that we regulate the water industry effectively to ensure it provides value for billpayers and safeguards our natural environment.”

The letter to Severn Trent Water CEO Liv Garfield which is attached raised the following key points:

Use of accounting practices: STW is accused of using financial tactics to avoid mandated investments while continuing to reward shareholders and executives, which contradicts government and regulatory expectations.

Infrastructure concerns: Claims of record investments by STW into infrastructure to reduce storm overflows and leaks, however this is not reflected in what we see across our constituencies.

Bill increases: STW’s proposal to raise consumer water bills by 46% over the next five years—above the national average—is criticised, especially as these hikes coincide with continued executive bonuses.

Environmental impact: Despite promises in their business plan to reduce harm to rivers, STW remains under investigation by OFWAT for wastewater treatment practices that may damage waterways.

The joint letter demands that Severn Trent Water accelerate overdue infrastructure projects, particularly for small rivers. It also calls on the company to reassess its proposed bill increases before OFWAT makes a decision in December 2024 and to redirect financial focus from bonuses to upgrading infrastructure.

The government and OFWAT are working to ensure that water companies prioritise essential improvements over profits. The letter urges STW to align with these goals to address the long-standing issues facing the water industry.

Following the recent BBC Panorama report Severn Trent issued the following statement:

A Severn Trent spokesperson said “The allegations made by Panorama are completely inaccurate, misleading, and misrepresentative of how we operate as a UK listed and highly regulated business.  As we have repeatedly informed Panorama we welcome scrutiny and debate, but this must be based on facts and evidence rather than unsubstantiated opinion and false claims.  

“Severn Trent operates under the full scrutiny of its regulators and the extremely high financial standards demanded of every FTSE listed company, ensuring we run our business in a transparent and financially responsible way.  We are consistently held up as sector leaders, being repeatedly recognised at the highest level for our environmental performance over the last five years, rightfully determined under an increasingly tough framework by the Environment Agency. 

“Severn Trent will continue to invest record amounts into the infrastructure that serves our customers. We are progressing faster than any other water company to reduce the number of spills from storm overflows well ahead of regulatory targets.  We know that this is the number one issue for our customers and we won’t stop our work until we’re operating at global best practice.”