Investigations and pressure pile up for beleaguered South East Water

(by Karma Loveday and Verity Mitchell)

Repeat water supply failures – compounded by widely criticised communications and incident response – has left South East Water (SEW) this week facing five investigations, more Parliamentary scrutiny and calls for both its operating licence to be withdrawn and its leadership team to be sacked. 

Situation recap

Tunbridge Wells has been at the centre of the problems, suffering a sustained outage and boil water notice before Christmas caused by a raw water quality change at the Pembury treatment works, and further supply problems in January caused by freeze-thaw events and Storm Goretti. East Grinstead and other parts of Kent and Sussex were also affected by the latter. In all, around 30,000 customers experienced either no water or low pressure (some intermittently) across last week.

Water had been restored to most properties by Friday. However, according to SEW’s most recent update (at the time of writing), problems were ongoing in the Bidborough area of Tunbridge Wells, while around 4,500 properties around Maidstone were also affected by an electrical fault at a water treatment works.

The investigations

Ofwat has opened a new investigation looking at whether SEW has complied with its customer-focused licence condition (Condition G). This requires companies to meet principles of customer care, including proactive communications during incidents and appropriate support for those in vulnerable circumstances. This is the regulator’s first scrutiny of a potential breach of the newly introduced licence condition. If a breach is found, it could lead to enforcement action and a fine (or equivalent) up of up to 10% of company turnover.

This is separate to an ongoing Ofwat investigation into SEW’s supply resilience under Section 37 of the Water Industry Act 1991. This seeks to determine whether the company failed to develop and maintain an efficient water supply system and to ensure that it had in place adequate resources and systems of planning and control to enable it to carry out its functions as required by licence Condition P12.

The Drinking Water Inspectorate was already investigating SEW for the November/December Tunbridge Wells outage and boil water notice. Last week it said it would also investigate the more recent water supply incidents in Kent and Sussex.

Meanwhile, the SEW board has instigated an internal review.  Responding to the Environment, Food and Rural Affairs (EFRA) Committee’s request for clarification of evidence given by SEW to MPs on 6 January, SEW chair Chris Train said independent non executive director Caroline Sheridan would carry out a rapid, in-depth review of the incident and its root cause analysis. This will be based around three work streams: technical, customer and communication, and incident management. This is due no later than April.

SEW doubles down

Elsewhere in his letter, Train backed the evidence given to MPs by chief executive David Hinton about the pre-Christmas Tunbridge Wells outage. He said SEW’s engagement with the DWI was “cooperative and candid throughout the event” and that “Our view remains that the precise nature of the event was not foreseeable… The fact that SEW has not previously experienced this very complex combination of circumstances and there is limited precedent among the convened industry expert group is what led us to the conclusion that this event was not foreseeable in advance.” This contradicted the DWI’s evidence to the EFRA Committee on 6 January.

Train also challenged concerns expressed by the DWI about resources, staffing and the ability of SEW to control the Pembury works out of hours. He said: “Pending completion of the review, SEW has not identified any evidence which suggests that continuous staffing of the Pembury WTW in advance of the event would have made the event foreseeable or avoidable.”

Finally he raised the issues of under-investment (including in the company’s PR24 settlement which it is challenging at the Competition and Markets Authority); the speed and severity of climate change the south east; and higher demand for water. 

Execs recalled

This seems to have cut little slack with EFRA, which said it plans to recall both SEW and the DWI for a further evidence session.

Committee chair Alistair Carmichael MP said: “Members of the press and public would be forgiven for seeing Mr Train’s announcement of a further review of the Pembury failure as an attempt to buy themselves time, to hunker down until this storm blows over. They also assert that their review will be ‘independent’. It stretches the meaning of ‘independent’ when their review is to be conducted by a member of its board, supported by its staff. What was the investigation done by the DWI if it was not an independent review?

“My colleagues and I remain deeply sceptical about the company’s version of events to date, and its board’s track record of holding the company to account. We would be failing in our duty if we now allowed them without challenge to mark their own homework, let alone on a timescale that will add months to the process.

“We will seek a further evidence session with both the DWI and the company’s chief executive and chair. Ahead of that we shall gather further evidence and allow the current outage affecting customers in areas of Kent and Sussex to pass. I would expect the forthcoming session to include one of the non-executive directors as we now see issues of corporate governance affecting the delivery of the company’s services.”

Political pressure builds

The widespread consequences of the outages for homes, healthcare and business across the south east has provoked broad political intervention. Some key moments last week were: 

• Discussion of the outages at PMQs, including Liberal Democrat leader Ed Davey challenging Sir Keir Starmer: “SEW keeps failing its customers over and over again, so will the Government immediately strip it of its licence?” Starmer said the situation was “clearly totally unacceptable” and that ministers “have chaired daily emergency meetings to hold the company to account”. 

• Tunbridge Wells MP Mike Martin wrote to the chairs of SEW’s “ultimate beneficial owners" urging them to “sack its leadership and bring in a turnaround team”. He cited that “the UK Government is considering stripping SEW of its licence to operate… without its licence, SEW is worthless and you would have no choice but to sell its assets to another provider at a significant discount”. He went on to say SEW’s chief executive had “behaved abominably throughout” and that the chair had issued “a delusional statement seeking to blame the regulator, the weather and customers working from home for the total collapse of SEW’s network”. 

• Environment secretary Emma Reynolds went to visit affected residents in Tunbridge Wells. This was followed by a statement which said: “Water bosses must be held accountable for significant failures, and the Government is making changes in the sector to ensure that this happens. We have more than doubled compensation rates for households and businesses when their water services fail and banned unfair bonuses for water bosses – with ten bonuses blocked last year worth £4m.”

Two companies in the south east now look to be under renewed pressure to cut performance-rated pay and other non-salaried remuneration. In 2025, Hinton earned a £115,000 reward and is line for £565,000 in fixed pay this financial year if the service award is divided equally over the five-year period. Meanwhile, Southern Water’s chief executive and chief financial officer look unlikely to receive their performance-related pay now that the plastic bead spill at Camber Sands last November has been upgraded to a Category 1 pollution incident by the Environment Agency.