Corporate power at its best: job losses and rising profits at United Utilities
Article published: Friday, March 5th 2010
In early November, Warrington based water giant United Utilities (UU) announced it was significantly restructuring its business. One staff member at the time said they were expecting the loss of 200-250 jobs. CEO Philip Green said a reassessment was necessary in anticipation of the five yearly price review by the industry regulator Ofwat, which came out a few weeks later. Now the company is paving the way for 350-500 redundancies, mostly in Warrington.
Management is currently in a 90-day consultation with workers and the four unions involved: UNISON, Unite, GMB and Prospect. This period should have been completed by early February at the latest. However, negotiations are still ongoing, and expected to continue into March.
When pressed for details by MULE, a UU spokesperson said: “We are consulting with the unions to explore how we can maintain the strength of our business given the current economic challenges.
“Our aim is to continue to deliver high quality water and wastewater services to our seven million customers and keep their water bills low.”
Prices rise
Apparently this wasn’t the case in August 2008, when the company proposed an 11 per cent rise in prices from 2010 to 2015, which the Consumer Council for Water warned would be unaffordable for many customers. Ofwat’s final determination of November 26, ruling that real prices should fall by 0.4 per cent for UU during that period, might well have been behind the company’s sudden urge to ‘streamline’.
The new prices, which all national water companies have now accepted, come into force in April. UU is now required to reduce prices by 4.3 per cent over the next year. It was only after accepting the review that UU officials announced the increased job cuts.
The day before Ofwat published the price review, UU posted its half yearly financial report. It showed that in the six months ending 30 September 2009 the company made an underlying operating profit of £370 million, an annual increase of £4 million, despite the “difficult economic environment”. In the year up to 31 March 2009, revenue grew to a massive £2.44 billion, with underlying operating profit at £742 million.
It doesn’t exactly look like a company in trouble, having managed to increase dividends payout to shareholders by five per cent in the last six months. In 2008/9 Philip Green took home £1.27 million, including £471,400 in bonuses. Since November however, the company has been selling off assets which are not regulated by Ofwat, or as Green puts it, “crystallising value”. The most significant of these are holdings in Northern Gas Networks and Manila Water in the Philippines, which were sold for around £130 million. Private equity firm Charterhouse is apparently the frontrunner to buy out United Utilities Contract Solutions for another £500 million.
Despite the sell-offs it’s difficult to argue that redundancies and a freeze on new graduate recruitment are necessary. Employees were clearly shocked by the news and union insiders claim they first heard of the figures through the press.
Negotiations
A spokesperson from UNISON told MULE: “UNISON, along with three other trade unions, is in dispute with United Utilities over potential job cuts.
“We are currently trying to resolve the dispute through negotiations, and are working hard with the company to avoid job cuts and compulsory redundancies.
“Our negotiations are, however, at a difficult stage, and we cannot rule out any possibilities, including strike action.”
Shareholders, however, want more dividends. Before Christmas, Merrill Lynch analyst Fraser McLaren launched a stinging attack on Green and the company, claiming payouts will likely be cut 40 per cent this year, ringing alarm bells for investors worldwide. UU then opted for a smaller decrease in payouts, another possible explanation for the rising job losses.
This seems to be the cost paid when essential public services are operated by profit-driven corporations. There’s not much Ofwat can do, as companies like UU will wring the money out of whatever situation they’re put in. It’s workers and customers who pay the real price.
Andy Lockhart
More: Features, Manchester, News
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