Now South East Water says it is running out of cash

Labour ministers will hold urgent talks with water companies today as they prepare for a regulatory ruling on their finances.

Executives from Thames Water, South East Water and Severn Trent are among those summoned to meet Environment Secretary Steve Reed.

This comes as regulator Ofwat prepares to outline how much debt-laden firms will be able to increase their bills over the next five years.

In another sign of the dire situation in the sector, South East Water yesterday asked investors for an emergency cash injection.

The utility, which has 2.3 million customers across Kent, Sussex and Surrey, said it was running out of money.

This followed Thames Water’s warning on Tuesday that it only has funds to survive until May next year without shareholder support.

It has 16 million customers in London and the South East.

Today’s meeting signals that Labour is preparing to take a tough stance against Britain’s ailing water companies.

A source close to Reed said the election was a “reset moment” for the sector and promised that Labour is planning to reform the industry.

This comes after sewage discharges into England’s rivers and seas more than doubled last year.

According to figures from the Environment Agency, there were 3.6 million hours of spills in 2023, equivalent to around 400 years.

No river in England is in good health and sewage has been released into iconic places such as Windermere in the Lake District.

The issue has sparked anger among the public and activists as water companies continue to pay huge bonuses to bosses and dividends to shareholders.

Thames Water said this week it paid £196m in dividends to its parent company and executive bonuses of £754,000 last year.

Ofwat’s draft resolution on business plans for the next five years is of particular importance to Thames Water, which needs to know whether it can increase bills by 44 per cent before it can hold formal talks with shareholders to raise fresh cash.

Failure to raise additional funds could trigger a major industrial crisis for the government.

Meanwhile, South East Water said yesterday it needs more money from its shareholders.

It wants to increase customer bills by 22 per cent and “hopes” to secure the extra funding but has yet to reach a deal, raising concerns it is at risk of collapse.

Ofwat’s announcement will kick off six months of negotiations before a final decision is made in December.