Severn Trent intends to build turnover from the two divisions to just over pounds 1bn by

Severn Trent intends to build turnover from the two divisions to just over pounds 1bn by 2005, by when it estimates that non-regulated businesses will account for just over half its revenues, a quarter of operating profits and 60 per cent of total staffing.The company plans an aggressive campaign to win industrial and business customers from rivals when competition steps up from March. However, Severn Trent said it would not have to resort to paying dividends out of reserves.The company has ruled out a big US acquisition to fill the hole in earnings, opting instead to build up its Biffa waste treatment business and its US-based services business. “It is not a question of dividends or jobs, but delivering against a very prescriptive Ofwat agenda,” he added.The company said it intended to maintain dividends at least at this year’s level for the next five years Dividend cover will fall next year as a result. Severn Trent warned that compulsory redundancies could not be ruled out. The company is setting aside pounds 50m this year to pay for the restructuring, but it estimated that the cuts would yield savings of pounds 40m a year when fully implemented.Brian Duckworth, managing director of Severn Trent Water, denied that the workforce rather than shareholders were paying for Ofwat’s price curbs. However, the company said it will maintain its dividend and has decided not to “press the nuclear button” and appeal to the Competition Commission over the prices ruling by Ian Byatt of Ofwat.
Severn Trent said it was accepting the new curbs – which will cut bills by 14 per cent next year – because of the complexity of appealing, the distraction it would entail and the uncertainty of the outcome.The job losses – equivalent to about one-fifth of the workforce in its regulated water business – will be phased over two years.

SEVERN TRENT, Britain’s second-biggest water company, yesterday announced 1,100 job losses and warned that profits would be pounds 120m lower next year because of price curbs imposed by the industry regulator. Some analysts have been concerned that the heavy branch concentration of a combined group in the north-west of England could pose competition problems for the bid.NatWest Bank shares closed 15p lower at 1,412p, Royal Bank shares fell 28p to 1,162p and Bank of Scotland shares rose 28.5p to 749.5p.. Halifax would not comment, although it too is thought not to be interested in entering the fray.Sir David Rowland has reportedly suggested that there are too many big, old-fashioned banks in Britain, and that the sector would benefit from consolidation.Analysts and legal experts yesterday suggested that Royal Bank of Scotland’s bid for NatWest is likely to be cleared by regulators, even though it may be asked to slim its branch overlap in parts of Britain. Abbey National held talks with NatWest two years ago but is not thought to be interested any longer.

It has released Warburg Dillon Read as its financial adviser and Warburg has joined the Royal Bank of Scotland team.However, Abbey National would be interested in Gartmore and NatWest Equity Partners, two of the subsidiaries that have been put up for sale by NatWest as part of its defence strategy. Others said they were an attempt to put pressure on Royal Bank, whose pounds 25bn bid was turned down last week.While a deal between a high-street clearer such as NatWest and a mortgage bank might make sense in theory, it is unclear if any of the major players are interested. they would be our best partners.” NatWest later tried to backtrack from the remarks, saying Sir David had been commenting generally on banking consolidation.
But analysts said the comments could be interpreted as a “come-on” to mortgage banks such as Halifax and Abbey National. NATIONAL Westminster Bank appeared to invite the UK’s largest mortgage banks to enter the bid battle for NatWest yesterday, when its chairman hinted that such a deal would make more sense than a tie-up with either Royal Bank of Scotland or Bank of Scotland (BoS). Sir David Rowland appeared to be giving the green light to a mortgage bank bid when he was reported as saying: “The closest merger benefits for us would come from a mortgage bank… A cyclical upturn in Euroland will need to be underpinned by deeper structural changes for a better long-term growth performance..

As Wim Duisenberg has pointed out, public confidence in the new currency must be maintained The one-dollar euro matters a bit in this context. More important, the blame game, if politicians permit it to continue, will undermine popular support for the euro That, too, might not matter in the short term. But it will if support is waning when the ECB does want to raise interest rates or when the economy hits its next rough patch.The ECB president is also right – although not necessarily wise – to point the finger at the German government for its reluctance to undertake necessary economic reforms, symbolised by the Holtzmann bailout and the support for Mannesmann against Vodafone. What’s more, apart from oil, the inflation background is extremely benign.This is why European stockmarkets could join the US and UK in yesterday’s surge. On the Continent too there is every prospect now of non-inflationary growth, even if not on the American scale.However, there is one sense in which the euro-furore does matter. However, the beauty of monetary union is that it has turned Euroland into a large, relatively closed, economy. The exchange rate would have to stay weak for a long period for it to contribute much by way of inflationary pressure.