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Can David Hinton, the chief executive of South East Water, stay in his job long enough to bag a £400,000 bonus for turning up to work? With four and a half years to go, one can’t say his chances of landing the retention payment – or “service award” – are good. In fact, it will be surprising if he’s still infuriating the residents of Tunbridge Wells four and a half weeks from now.
In the latest episode of this long-running double saga of outages that has left thousands of households in Kent and Sussex without running water for days, Ofwat has opened a first-of-its-kind investigation into whether South East complied with its obligation to provide “high standards of customer service and support”. That comes a day after Emma Reynolds, the environment secretary, called for the regulator to review the company’s operating licence.
Meanwhile, even the company’s shareholders, who normally shun the spotlight on these occasions, are spluttering into their bottled water. NatWest Group’s pension fund, a 25% owner, said it was “extremely concerned” by the impact on customers and said it would use its influence “to direct South East Water’s board to ensure these issues are fully resolved”. That wasn’t quite an instruction for heads to roll, but it wasn’t far off.
One can understand its alarm. Shareholders sank £200m in fresh equity into South East as recently as May, on top of £75m in December 2024, to support an over-extended balance sheet. Yet the company’s last annual report was still full of scary lines about how it needed “a more balanced regulatory settlement” to be able to “fulfil its purpose as a provider of the public water service now and in the future”. On that score, developments aren’t encouraging either: South East asked the Competition and Markets Authority (CMA) for an 18% uplift on the bill increase granted by Ofwat. However, in its provisional finding (the final is still awaited), the appeals regulator allowed 4%.
Against that strained financial background, it was vital that South East handled any operational crisis, such as two big outages in two months, slickly. We’ll see what Ofwat says but one doubts it will award the “eight out of 10” that Hinton gave himself when appearing before MPs this month. To outside eyes, he has served up a masterclass in how not to communicate during a crisis: he told MPs his reluctance to give interviews was in case he was asked distracting questions about his pay or shareholder dividends.
There’s a lot to ask about. Why did South East’s board feel Hinton needed a performance-free £400,000 incentive to stay in post for five years, as the Guardian reported on Thursday? It had simultaneously just awarded him a 30% increase in his annual salary to the same level and reintroduced a long-term incentive scheme (on top of the annual bonus scheme) worth 150% of salary, which is the normal way to encourage executives. How many carrots does he need? Actually, one more: a one-off £50,000 “cash allowance” for work on the CMA appeal.
Separately, Ofwat is running an engineering-related investigation into whether South East “failed to develop and maintain an efficient water supply system”. That one dates from 2023 and the outcome is due within weeks. The potential penalties are piling up. In the shareholders’ shoes, you’d get a new boss in there as soon as possible in the hope of saving your investment.
