Severn Trent faces £25m hit

SEVERN Trent, the utility responsible for supplying water to South Yorkshire and Derbyshire, today said that a falling number of business customers was likely to hit revenues by up to £25m this year.

In an interim management statement the group said that it has been trading in line with expectations in the period since October 1.

However it said that the decline in consumption it highlighted last year has continued and is now likely to reduce its revenues by between £20m and £25m in the current financial year rather than the £12m to £15m hit it had previously estimated.

The company, which serves more than 8m people in the Midlands and South Yorkshire, is in talks with industry regulator Ofwat about a five-year pricing and capital investment plan for the sector from 2010.

However, it has already warned that the high cost of capital amid the financial crisis meant that future spending plans need to be monitored

The group said operating expenditure in 2008/09 remains on track with it expecting to deliver £30m of cost savings over the next two years.

Severn Trent said that while it remains on track to meet operating and capital expenditure targets, the rapid fall in inflation will have an impact.

Severn Trent will publish a pre-close trading statement on March 24 and announce its year-end results on May 29.