WATER COMPANIES this week warned that proposals to boost their efficiency by water regulator Ofwat will lead to cuts in investment and a quarter of their workforce being axed.
Draft proposals published by Ofwat in September suggested that water companies should make a 14% improvement in their operating efficiency over the next five years. OFWAT is due to deliver its final decision on November 25.
But Water UK, the water industry trade association, claimed that the intensive streamlining necessary after privatisation had already caused significant job losses and had left the industry with no more slack to achieve Ofwat's targets.
Water UK chief executive Pamela Taylor estimated that to meet the performance targets, firms would be forced to make a further 25% of staff redundant, cut maintenance projects and freeze new investment.
Taylor claimed that the severity of Ofwat's proposals would also leave UK companies without the financial clout to take on European and US competitors.
Ofwat's suggestions come after two years of research into industry practice. A spokesman said water firms had played a central role in helping the regulator prepare profiles of savings made to date and current operating costs.
He said calculations had taken into account both current and planned infrastructure investment and the predicted changes in costs and tariffs.
But a source at Water UK claimed that operating costs were likely to be higher than Ofwat anticipated as 60% could not be accurately forecast. He also suggested that improvements demanded by Ofwat would force many companies to spread future investment, currently planned over the next five years, over a longer period.