Scottish Water subsidiary may require multi-million pound financial support due to Covid-19

A subsidiary of Scottish Water may need between £47 million and £88 million in financial support due to the impact of Covid-19 on the businesses it serves.

Scottish Water Business Stream (SWBS), set up in 2008, supplies water and waste-water services to businesses throughout Scotland and parts of England.

The Auditor General for Scotland says:

• Covid-19 has so far not significantly affected the household water market. But some of SWBS’ customers, in particular retail, hospitality and small and medium sized businesses, have experienced reduced water consumption and delays in payment of bills.
• This exposes SWBS to a greater risk of water bills not being paid by some customers, should they fail to recover from the economic impact of Covid-19.
• Scottish Water’s financial modelling suggests SWBS could need financial support of between £47 million and £88 million over the next two years. This would come from borrowing within the Scottish Water group and no additional Scottish Government funding is likely to be required.

The board of Scottish Water, the Scottish Government and the Water Industry Commission for Scotland have agreed the steps needed to provide financial support, if this is required.

In 2018/19, SWBS reported income of £372 million and an operational profit of £0.03 million. In 2019/20 its income increased to £477.5 million, but it recorded an operating loss of £14 million, largely as a result of ‘doubtful’ debts of £13.3 million arising from Covid-19.

Stephen Boyle, Auditor General for Scotland said:

Scottish Water Business Stream has operated profitably since its creation. However, the Covid-19 pandemic is affecting its customers and has created financial risks. The potential need to provide ongoing financial support to Business Stream means it will be vitally important for Scottish Water to continue to monitor closely the delivery of its business plans and the performance of its subsidiaries.