The chair of South East Water has resigned after MPs said the company was “riddled with cultural problems” and “devoid of leadership”.
Chris Train, the independent non-executive chair, stepped down from the board with immediate effect on Friday.
The environment, food and rural affairs committee (Efracom) had said it had a total lack of confidence in the company’s boss and board after questioning them about tens of thousands of properties being left without water.
The committee said the company had fundamentally failed the communities it served, predominantly in Kent and Sussex, demonstrating an “exceptional failure of management and of corporate governance.”
“South East Water presents as a company devoid of proper leadership, riddled with cultural problems that raise serious concerns about the ability of the executive team,” the MPs said in a report published on Friday.
They were responding to a series of outages including a failure at a water treatment works that left 24,000 properties in Tunbridge Wells without drinking water for up to a fortnight. The crisis forced schools to close, disrupted care homes and GP surgeries and caused huge financial losses for local businesses.
Efracom took the rare step of calling for an intervention from big shareholders, including the NatWest Group Pension Fund. It said that because both the executive and non-executive directors had failed to rectify the problems, shareholders had a “duty to act”.
The MPs said that the company’s board, “potentially influenced by the ‘family feel’ that they identify”, was incapable of holding the leadership team to account. The company is led by David Hinton, who took a £115,000 bonus last year but has ruled it out this year.
Alistair Carmichael, a Liberal Democrat MP and the committee chairman, said: “Someone in this company needs to take a grip, be accountable for its failings and to put them right. They can no longer be allowed to ignore the consequences for the consumers that they are licensed to serve.”
The government has also made clear its frustration with South East Water. Emma Reynolds, the environment secretary, is understood to be looking at “all options” for turning the company around. That includes the possibility of calling in shareholders to understand their position on the problems.
The MPs highlighted a toxic culture of “groupthink” and obfuscation at the top of the company. Hinton was criticised for having spent a significant amount of time at the failed treatment works, which the report said was “a potential distraction from his overall crisis command”.
The committee also took him to task for scoring the company’s incident response to outages as “eight out of ten” and accused him of displaying “optimism bias” in telling customers when they could expect their supply to be restored.
The company was criticised for multiple failings that led to the outages, as well as for its response during the crisis. Those included poor maintenance of infrastructure, failure to monitor critical risks, failure to invest and build resilience and blaming external factors such as climate change and increased demand.
The company was also accused of a disorganised and slow response, a lack of communication with customers and insufficient emergency supply through water tankers and bottled water.
Train has been replaced by Lisa Clement as interim chair. South East Water said it was “mutually agreed that new independent board leadership is now required to oversee a critical period of positive, transformative change for the company, its customers and local communities”.
