South East Water Under Fire

Introduction to the Crisis

When South East Water is in the news, the headlines generally don’t make for pleasant reading. The water and wastewater industry and its regulators have little to cheer about, and this water-only utility now faces calls to be nationalized due to its poor performance and the chaos in its supply chain.

The Extent of the Problem

23,000 properties were affected due to supply problems in Kent and Sussex, and a serious incident has been reported in the two districts. People experienced a fifth day without water as Storm Goretti caused power outages and burst pipes on Friday and Saturday last week. This followed a “water quality issue” in December that left 24,000 people in Tunbridge Wells without water for days.

Response from South East Water

A South East Water statement expressed deep regret for all affected customers, acknowledging how difficult it is to go without water for such a long period and how it affects everyday life.

Ownership and Financials

The company, which serves 2.3 million households, has been owned for almost 20 years by a consortium of mostly foreign investment and pension funds called HDF Holdings. The company has long been criticized for paying dividends to shareholders while struggling with high levels of debt. A new £200m cash injection was made a year ago to keep South East Water afloat until water regulator Ofwat passed inflation-curbing legislative increases.

Criticism and Calls for Nationalization

The 20 percent increase in the 2025-2030 settlement should allow for greater investment in neglected utility infrastructure. However, the company’s management team is facing harsh criticism amid allegations it continues to be rewarded for failures. Lender NatWest’s pension fund also has a 25% stake in South East Water and has expressed extreme concern about the impact of these incidents on households, businesses, and other users who rely on South East Water for their water supply.

Why South East Water Doesn’t Work

A water industry source described South East Water as "an enormous failure," stating that the company is not as resilient as it needs to be. It’s a tiny company that’s been patched together, lacking the connectivity to move water around its network like other companies do. The source believes that the need for more investment in resilience is not the full picture and that the company is fundamentally failing.

Financial Performance

The latest financial figures for the company’s 2024 to 2025 financial year show it made a pre-tax loss of £19.8m, narrower than the loss of £36.7m the previous year.

Criticism of the CEO

South East Water chief executive David Hinton has faced direct criticism from local and national politicians and Kent residents in recent months. Following an appearance before MPs’ Environment, Food and Rural Affairs (EFRA) Committee, where Mr. Hinton suggested working from home was partly to blame for the water supply problems, he and senior leadership were recalled to give evidence. Mr. Hinton’s salary increased last year, with his annual bonus rising to £115,231 and his basic salary rising to £307,274.

Regulatory Action

Ofwat has long criticized South East Water for leaks and has imposed penalties. The most recent penalties came in 2023/2024, when Ofwat announced an £8 million fine for failing to meet targets, along with a further charge of £3.2 million due to supply disruptions.