Takeover to raise prices, says Ofwat

The water industry watchdog Ofwat has warned that the planned takeover of South West Water by Severn Trent could lead to higher bills, poorer services and lower investment for customers in the Midlands.

The concerns are voiced in a letter from Clive Wilkinson, chairman of the Ofwat customer service committee for the region, to local MPs, local authorities and consumer groups.

Mr Wilkinson is particularly concerned about what might happen to prices, pointing out that the average domestic water and sewage bill for Severn Trent customers is pounds 201 compared with pounds 329 for householders in the South- west.

"Any policy of bill harmonisation could increase charges to existing Severn Trent customers significantly," he writes.

The letter also highlights other problem areas such as the danger that Severn Trent will be inhibited from funding its own capital investment programme by the cost of mounting a bid for South West.

Mr Wilkinson goes on to warn that the "substantial numbers of senior executives" that would need to be diverted from Severn Trent to South West to make the takeover successful was bound to weaken its ability to deliver improved services. The letter also questions what level of job losses would occur.