Liv Garfield, chief executive of Severn Trent (SVT), describes its latest price settlement with regulator Ofwat as "one of the toughest in our history". Under the five-year regulatory cycle that started this year - Asset Management Programme 6 (AMP6) - the Midlands water company faces a lower return on capital. In response, the company announced in January that it would cut its annual dividend by 5 per cent to 80.66p for the current year.
The price settlement also laid out £372m in cost savings. The company began preparing for this last year and has already locked in £300m of its targeted efficiencies. Measures to take out middle management last year will cut £100m from the cost base, and 'supply-chain efficiencies' - such as a new single-supplier contract for waste water - should deliver a further £200m.