MPs accuse South East Water leaders of incompetence over repeated outages
MPs have accused the leadership of South East Water of incompetence over repeated water outages for tens of thousands of customers in a damning report, and expressed no confidence in their ability to reform the company.After publication of the report, SEW announced the resignation of its independent non-executive chair, Chris Train, saying new leadership was needed to “oversee a critical period of positive, transformative change”.MPs from across the political spectrum said David Hinton, SEW’s chief executive, and the board of directors operated a culture of unaccountability at the company, which provides drinking water for 2.3 million customers in Berkshire, Hampshire, Kent, Surrey and Sussex.SEW describes its leadership in official communications as having a “family feel”, but the environment, food and rural affairs committee of MPs said they were better described as “an unaccountable clique”.
The company, which faces a £22m fine from the industry’s regulator, Ofwat, over serious disruptions to the water supply over many years, comprehensively failed to deliver for the consumers it served, the MPs said,The report comes after the committee mounted an investigation following a major water outage in November and December last year which left tens of thousands of people in Tunbridge Wells, including elderly and vulnerable people in care homes, without water for two weeks,There was a further disruption to supplies in January this year,Alistair Carmichael, chair of the committee, said MPs had taken the unusual but necessary step of declaring no confidence in Hinton and the board to highlight the gravity of what was an extraordinarily poor situation,“This is an exceptional failure of management and of corporate governance,” he said.
“The refusal of anyone in the company to be accountable for this failure cannot, in our view, be overlooked,”Carmichael, a Liberal Democrat, added: “One cannot overstate the dangers of so many communities losing water supply for extended periods, including schools, GP surgeries and care homes … someone in this company needs to take a grip, be accountable for its failings and to put them right,”MPs welcomed the resignation of Train on Friday, but said further leadership change was needed: “We welcome the decision by South East Water’s chair, Chris Train, to take his share of responsibility for the failings at South East Water and resign,However, many of the problems identified in our report fall firmly into the areas of responsibility of the chief executive, David Hinton,Our report, published today, calls for a change of leadership at both executive and non-executive levels,” said Carmichael.
The report said the company shareholders, Utilities Trust of Australia, NatWest Group Pension Fund, Desjardins Group and associated holding companies, had a duty to act to hold the company to account, adding they shared some of the blame for its performance.SEW was “devoid of proper leadership”, with cultural problems that raised serious concerns over whether Hinton and other executives could bring the water firm back into compliance with its licence, MPs said.A water company found to be repeatedly in breach of its licence can be put into special administration, a form of temporary nationalisation, by the environment secretary and Ofwat.Hinton, who is on a base salary of £400,000 and was given a bonus of £115,000 last year, was recalled to the committee in April over concerns that he had misled them at an earlier appearance.At his first appearance, Hinton gave himself an eight out of 10 score for dealing with water shortages.
During his second session in front of MPs, Hinton said he would forgo his bonus and apologised to customers.The new report found the company had failed to monitor critical risks at its Pembury water treatment works, where failures led to the two-week outage in Tunbridge Wells last year, failed to maintain its assets and failed to invest.MPs said the company and its shareholders had known for four years they needed to upgrade and invest in new infrastructure to be resilient to potential shocks.But the company had either not attempted or failed to make the necessary investment case in its negotiations with Ofwat.In a report in March this year, Ofwat said SEW had one of the worst water supply interruptions performance in the industry.
Subject to consultation, it has issued a £22m fine for multiple supply disruptions between 2020 and 2023, which affected more than 286,000 people.SEW sought to challenge the findings of the report and in the meantime tried to keep the report secret by seeking an injunction to stop publication.But a judge threw out the injunction attempt, saying it was “far from compelling.”The attempt by the board to block publication of the damning report was condemned by MPs, who said it demonstrated “at best a lack of transparency, and at worst an attempt to actively deceive external shareholders”.The environment secretary, Emma Reynolds, said: “The water supply disruptions faced by businesses and homes in Tunbridge Wells have been completely unacceptable.
“I have already hauled in the CEO and chair of South East Water to my office to ask them why we’re seeing repeated failures in leadership and service to customers, and I took the extraordinary step to ask Ofwat to investigate its licence conditions,“I have demanded a serious recovery plan and swift action to prevent an incident like this happening again,”Responding to the report, SEW said it planned to double investment into the water supply network serving Kent, Sussex, Surrey, Hampshire and Berkshire over the next five years,“The board and executive team reiterate their unreserved apology to those customers impacted by recent operational failures, and the resulting loss of public trust in the company and its services,” a spokesperson said,Lisa Clement, the interim independent non-executive chair, said: “The board thanks Chris for his service to South East Water.
The company’s focus remains on delivering engineering and operational changes that will strengthen the resilience of South East Water’s network and transform the company for the benefit of customers and local communities,”
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