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Water companies struggling to maintain profits

With news that Severn Trent has seen a significant increase in bad debts, more and more customers saving water and a reduction of 13% in annual profits, it may be that the water companies are the first of the main utilities to receive a reality check. At a time when utility bills across the UK have been rising by higher than inflation, many will be pleased to see the likes of Severn Trent, and we would assume other water companies, struggling to push their profits ahead. But who will pay the price?

Unfortunately, with the likes of Severn Trent having a number of large shareholders to keep happy there is every chance they will apply to the regulator to reconsider their current regulatory pricing structure. Due to the reduction in inflation many water companies, and other utility companies, in the UK would be forced to reduce their charges in real terms which will impact upon profitability and cash flow. Ultimately, as and when the company is allowed to increase prices it will be the UK taxpayer who will suffer although this may be delayed until the economy shows signs of recovery.

Either way it looks as though UK consumers will be the real people to pay the price as and when utility companies start to feel the pain.

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