Business failure drain on water group

ESSEX & Suffolk Water parent group Northumbrian Water said yesterday that rising business failures in its core North-East area had left it with a �1.7 million bad debt bill during the first half of the current year.

The write-off was forced by the closure of a major customer on Teesside, while lower business usage by firms was impacting revenue growth, Northumbrian said.

The utility partly offset the difficult trading conditions through higher prices, but warned: “The current economic climate is having an impact on revenues, particularly those from industrial and commercial customers and those associated with the housing market.”

Northumbrian's energy bill also rose by �2.5 million compared with a year earlier, due to advance power purchases made by the business before markets softened.

But the firm's pre-tax profits rose by 13% to �87 million - broadly in line with expectations - due to much lower interest payments on its �2.3 billion debt pile.

Northumbrian serves a population of 2.6 million people in the North-East with water and sewerage services and 1.7 million in mid Essex, north Suffolk and south Norfolk, where it provides water services only.

The company, in line with the entire water industry, is eagerly awaiting the final verdict from regulator Ofwat on prices for the next five years due on Thursday.

In its July draft determination, the watchdog slapped down Northumbrian's proposals for a bigger rise in bills by limiting the company to a �3 or 1% increase in prices before inflation for the whole five-year period.

Northumbrian met with the regulator on September 30 to plead its case for a more generous settlement.

“We continue to monitor the uncertain situation very carefully and representations have been made to Ofwat following the announcement of the draft determination,” the company said yesterday.