A parliamentary committee has taken the unusual step of declaring no confidence in South East Water’s leadership with a Kent MP calling them a “clear and present danger” to residents.
South East Water (SEW) is accused of repeated failures over its handling of several water outages, which left thousands of people across Kent without supply.
Today (May 1), a damning 55-page parliamentary report by the Environment, Food and Rural Affairs (EFRA) Committee titled “Failures at South East Water” outlines several concerns including a “failure to maintain assets” and a “culture of failure” in which it says bosses tend to blame external factors instead of taking responsibility.
Then in January, a second major outage was declared which affected 30,000 people at its height.
Since then, the chief executive of SEW, David Hinton has faced repeated calls to resign but company chair Chris Train has stood by his leadership.
In the report published today, the cross-party EFRA committee write: “We have no confidence in either the executive or non-executive teams at South East Water.
“Shareholders should intervene to address the systematic, ongoing issues at the company, which are bringing misery to the consumers it serves.”
The committee has called for shareholders, Utilities Trust of Australia, NatWest Group Pension Fund and Desjardins Group and associated holding companies, to hold the company to account.
A spokesperson for NatWest Group Pension Fund said the impact of the incidents on customers is “unacceptable” and said they would ensure the board at SEW understands its position and addresses matters “with urgency”.
In addition, the committee found there to be a failure to monitor critical risks at Pembury Treatment Works, where asset failures led to a two-week outage.
In addition, it said there was a “failure to maintain assets…failure to invest in new infrastructure…a failure to plan ahead of increased water demands and extreme weather” and called its incident response planning “pitiful”.
The committee report also said another area of concern was SEWs failure to respond, communicate and deliver water to vulnerable customers.
This included the water stations being too reliant on people having cars, issues with water being delivered without notification and heavy packages being left on doorsteps which were hard for vulnerable customers to lift.
The damning report claimed there was a “culture of failure” and employees exhibited “groupthink” with a tendency to blame external factors for problems.
It also referenced the firm’s decision to file an injunction against the publication of an Ofwat report into long-term failings at SEW, calling it “at worst an attempt to actively deceive external stakeholders”.
Overall the committee took the position that the current governance framework at the company was failing to hold senior employees to account.
EFRA Committee Chair Alistair Carmichael said: “We have taken the unusual but necessary step of declaring no confidence in SEW’s CEO and Board because we feel obliged to highlight the gravity of this extraordinarily poor situation.
“This is an exceptional failure of management and of corporate governance. The refusal of anyone in the company to be accountable for this failure cannot, in our view, be overlooked.”
Mr Carmichael outlined the concerns of some SEW customers who say they feel the need to stockpile bottled water because they fear an outage will happen again.
“In twenty-first century Britain that is an almost incredible state of affairs,” he added.
“Someone in this company needs to take a grip, be accountable for its failings and to put them right.
“That should be for the executive leadership of the company and, failing that, it should then be the non-executive directors. That would normally be the end of the road, but when that fails, shareholders have a duty to act.
“We urge them to read this report and to take action. They can no longer be allowed to ignore the consequences for the consumers that they are licensed to serve.”
Responding to the report, MP for Tunbridge Wells, Mike Martin (Lib) repeated calls for senior leadership to resign and said: “I think you need to accept that you’ve failed and you need to make way for someone who is able to do your job.”
He added: “This is a repeated failure, and the company is not getting any better, it’s not learning any lessons.
“So, it’s time for the leadership to go, and I’m calling on the government, the Secretary of State [for Environment, Food and Rural Affairs], Emma Reynolds, to call those investors in and read them the riot act.
“SEW represents a clear and present danger to my constituents.”
MP for Weald of Kent, Katie Lam (Con), also responded by saying the parliamentary report is “bang on”.
She said: “South East Water is failing in its most basic duties. Because of their incompetence, people across Kent and Sussex were left without water for days.
“While families couldn’t wash, cook or even flush toilets, South East Water wouldn’t say — or didn’t know — what was going on. This is simply indefensible.
“The committee is right to have no confidence in the current leadership, and neither do I.
“If chief executive David Hinton won’t do the right thing and resign, the Board of South East Water must remove him.”
It comes after repeated major incidents, most recently in November to December where a failure at Pembury Treatment Works left 24,000 properties, including businesses, schools and care settings without clean drinking water for 14 days.
Then in January, on the same day Mr Hinton first gave evidence to the EFRA committee, another outage occurred again, until January 19, leaving up to 30,000 households without water at its height.
In March, Ofwat stated in a report, that for a decade, SEW has had one of the worst water supply interruptions performance in the industry.
In February, Mr Hinton released a statement apologising to customers and acknowledging that “trust had been damaged”.
He said: “I recognise the strain these incidents placed on customers and communities, and I am deeply sorry once again for the impact this had.”
In response to the report, a SEW spokesperson said: “We are carefully considering the details of the EFRA Committee Report, which is due to be published tomorrow. We will respond later today, once we have reviewed the report.”
A spokesperson for NatWest Group Pension Fund said: “The impact of these incidents on South East Water’s customers is unacceptable. We have consistently expressed our views to members of the Board that they must address the issues facing the company, including the issues of governance and leadership.
“We will continue to use our influence as a minority shareholder to ensure that the Board understands our position on these matters and will encourage the Board to address them effectively and with urgency.”
