United Utilities and Severn Trent set up non-household joint venture

Water groups United Utilities and Severn Trent have formed a joint venture of focused on their business customers, merging the billing, sales and customer services functions ahead of the business market opening to competition in England.

With both companies sharing the development costs, and Severn Trent paying £3.5m a 50/50 non-household JV will be created and profits shared using equity accounting.

Both companies have begun to build business in Scotland, where the market was first fully opened to competition, with England opening up to full competition from April 2017.

Currently, the only business customers in England and Wales that can choose their provider for retail services are those using at least 5m litres of water a year.

Before allowing for any financing or synergy effects, the JV would, had it existed, have produced just short of £1bn sales in the year to March 2015, with profit before tax of £9.7m Scottish operations alone.

If the Competition and Markets Authority clears the arrangement, as is expected before the end of May, the JV will be headed up by Sue Amies-King, currently business retail director at United, while Severn Trent's Stuart Howell will be chief financial officer.

Combining the businesses will create efficiencies and allow the JV to focus on its non-residential customers as well as growth.

Steve Mogford, CEO of FTSE 100-listed United, said: "We have been an early mover in building a strong non-household retail capability and have already established a sizeable presence in Scotland.

"This early progress, supported by our new customer relationship management system, means that we are well positioned for full market opening in England."

Severn Trent boss Liv Garfield added: "The introduction of competition into the non-household retail market presents us with an exciting opportunity to combine our expertise for the benefit of customers and shareholders."