Source · Select Committees · Environment, Food and Rural Affairs Committee
Recommendation 12
12
Acknowledged
South East Water’s leadership team has demonstrated a clear preference for blaming factors outside of...
Conclusion
South East Water’s leadership team has demonstrated a clear preference for blaming factors outside of their control for performance issues, and in some cases, they continue to do so, despite clear evidence to the contrary. A lack of data-analysis skills might be partially to blame, but it is also clear that a culture of obfuscating responsibility has also taken hold, seriously inhibiting their ability to analyse problems and learn lessons. The company’s investigations, as well as that of the Drinking Water Inspectorate, have identified potential issues with a lack of challenge or groupthink within the company: that “family feel” may be closer to a “clique” than a benefit. We have serious doubts that the addition of two more executives will tackle this pervasive problem. (Conclusion, Paragraph 68)
Government response summary AI-generated
The government acknowledges South East Water's serious failings and culture of obfuscating responsibility by detailing ongoing regulatory actions, including a credit rating downgrade, a licence breach, a proposed £22 million penalty, and placement into a formal Transformation Programme. It stresses that the company must now demonstrate credible leadership and delivery, and highlights increased customer compensation standards.
Summary of the government's response below — read the verbatim text to verify.
Government Response
Acknowledged
HM Government · verbatim extract
Acknowledged
As the Committee will be aware, on the 28 May, Moody’s published their decision to downgrade South East Water’s credit rating to Ba1 (outlook negative). This has resulted in a breach of Condition P26 of the company’s licence, triggering Ofwat’s duty to issue an enforcement order or agree suitable undertakings. South East Water is also subject to multiple ongoing enforcement proceedings via Ofwat and the Drinking Water Inspectorate (DWI). On 5 March 2026, Ofwat proposed a £22 million penalty for South East Water’s supply resilience failures following its investigation into major customer supply disruptions between 2020 and 2023. Ofwat’s consultation on this decision closed on 13 April 2026, and Ofwat are now considering the representations made. In April 2026, the Drinking Water Inspectorate concluded that the Tunbridge Wells incident in November/December 2025 was foreseeable and preventable, citing systemic operational failures, and placed the company into a formal Transformation Programme. Following the major outages in late 2025 and early 2026, in May, elevated temperatures drove increased demand, leading to significant disruption, with around 20,000 properties, mainly in Kent, experiencing intermittent supply. The disruption highlights my serious concern about the company’s resilience under predictable seasonal pressures. South East Water’s performance is clearly below the standard that customers and Government are entitled to expect. Repeated disruption to supply, weaknesses in operational resilience and the company’s ongoing regulatory breaches point to serious and unacceptable failings. The company is funded to deliver the necessary improvements, and it must now show credible leadership, a robust plan and early evidence of delivery. Government is working closely with Ofwat and the Environment Agency to ensure a strong, coordinated response that protects customers and restores confidence. Those affected must also be compensated promptly. Last year we doubled or more the compensation companies must pay to customers when they fail to meet standards, including incidents of supply outages or low pressure, and we also introduced new standards including for the issuing of ‘boil water’ or ‘do not drink’ notices. The incident in Tunbridge Wells was the first time a ‘boil water’ notice had been issued since the introduction of the new standard, meaning South East Water had to make mandatory payments to affected customers.
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