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Severn Trent warns of debt risk

26 July 2008

Severn Trent warned on Tuesday that more customers may struggle to pay their water bills as the country comes to grips with the apparent economic downturn.

The utility said it was closely monitoring customer debt and cash collections

Although bad debts are normally around two per cent of turnover, the issue was put at greater risk in the current economic mire.

In the year to March 31st, the firm wrote off £22.7 million, up from £22.3 million, on doubtful debts.

In its interim management statement, the UK's second largest water firm said: "Given the current economic climate we continue to closely monitor our customer debt and cash-collection performance.

"Whilst we have not experienced any material deterioration over the period to date, this remains a risk to our outlook over the remainder of the year.¿

Overall, trading from the April until July was in line with expectations.

Severn Trent, which has more than eight million customers, anticipated a drop off between £12-14 million in revenue in the financial year through less consumption.

Capital expenditure is due to be between £670-690 million for the year, including spending on flood defences.