Panorama backs CJ on water spend

More than œ200 million raised by the water companies to be spent on construction work has been deferred. The money has been used to boost the profits of the newly privatised firms, claims a BBC documentary.

The Panorama programme this week highlighted the low investment in construction, finding that money earmarked for repairing the UK's dilapidated sewers instead finds its way into company profit and loss accounts.

The programme's investigations underline Contract Journal's findings earlier this month (CJ, 2 March) that the much hyped water spend boom has not materialised.

One contractor said of the water firms: 'They are being run by accountants - their only interest is keeping the shareholders happy.'

The programme claimed that in all œ773 million has been raised from customers' bills for infrastructure renewal but only œ556 million has been spent.

Pollution consultant, Mike Matthews, said: 'The capital programme - the amount being spent on new works - is actually going down every year. And yet the turnover from customers' bills is actually going up.

'It's not surprising in those circumstances that you see the profitability of the companies increasing year upon year. If you delay your capital expenditure, you increase your profits within any given year.'

Thames Water had negotiated an increase in its bills with Ofwat to allow it to spend œ2.1 billion on capital projects, but it has since reduced that spending by œ350 million.

Contractors have expressed delight that this lack of infrastructure spending is being highlighted.

Jim Turner, spokesman for the Federation of Civil Engineering Contractors, said: 'We have been banging on about this for ages. It's good to see people sitting up and taking notice.'

But Wessex Water managing director, Colin Skellet, defended the industry, saying that other priorities such as dealing with pollution incidents had taken priority. 'We will see spending on sewer renovation rise over the coming years,' he said.