Severn Trent performance in line with expectations, trading update says after Ofwat investigation concludes

Severn Trent’s financial performance remains in line with expectations and the water company aims to continue to build on momentum, it said in its latest trading update.

The update comes as Ofwat said the Coventry-headquartered company has breached rules for failing to deal effectively with wastewater and sewage but no penalty would be issued as Severn Trent had taken “genuine accountability” to address the problems.

The regulator said the company’s response to its sector-wide wastewater investigation had set a standard expected from all water companies.

Severn Trent, which supplies water to more than eight million people across England and Wales, has since issued a trading update for the period up to July 8.

It said: “Following a strong start to FY27, we continue to build on our momentum with operational and financial performance in line with expectations. We remain confident of delivering at least £50 million of total performance incentives this year.

“Our capital programme continues to be delivered at pace, with around £440 million invested in the first quarter of the year, up 22 per cent year-on-year, and we are on track to deliver between £2.2 billion to £2.5 billion of capital expenditure in FY27.”

The update added that the Severn Trent Group “completed refinancing of its core bank facilities, increasing committed facilities to £1.65 billion across Severn Trent Water and Severn Trent Plc, underpinning liquidity and reflecting the strength of our position in the debt financing markets”.

Severn Trent, one of Britain’s biggest water companies, has sites in Wolverhampton and Birmingham and across the Midlands, and it employs around 10,000 people.

The utility company’s chief executive James Jesic said it accepted Ofwat's findings relating to its wastewater investigation and that it had “proactively identified and began addressing” issues of concern before an enforcement case was opened.

The FTSE 100 business said it had prioritised storm overflows more than 10 years ago and in 2023 committed to invest £450m by 2030 as part of its Spills Reduction Programme to upgrade storm overflows and storage capacity across its network.

It added that it expects to cut spills per storm overflow to an average of below 14 per year by 2030, and to achieve this, against a backdrop of climate change and population growth, will require continued investment.

Ofwat said the company’s shareholders had already invested £98m in direct infrastructure improvements because Severn Trent “recognised its obligations and acted on them”.

The investment has funded extra capacity at 65 wastewater treatment sites, Flow to Full Treatment and storm tank enhancements and increased storage at storm overflows, as well as £26m of nature-based solutions in Nottinghamshire.