Severn Trent, Britain’s second-biggest water company, is cutting 600 jobs across the UK, 10 per cent of its workforce, just months after handing shareholders nearly £580 million.

The water group, seen as a prime takeover target in the utilities sector, said that the move would kick-start a “process improvement” programme across the business.

Tony Wray, Severn Trent Water's managing director, said: “We have to constantly find ways of improving efficiency.

“The natural consequence of that is to do more with less.

“That is precisely what we are planning to do.”

The move follows a controversial £576 million special dividend paid out to investors following the demerger of the Biffa waste management arm in October.

Severn also faces a multi-million pound fine after missing Ofwat customer service targets, as well as the outcome of a Serious Fraud Office investigation into leakage data supplied to the regulator between 2000 and 2003.

Union leaders at Amicus attacked the decision and claimed Severn told staff via a company intranet website.

Dougie Rooney, national officer, said: "This is an unacceptable and appalling way to deal with employees at such a time.

"Our representatives have not been informed and we are demanding that the company enter into proper consultations. Otherwise Amicus is prepared to consider industrial action."

The job cuts will be spread across permanent and agency staff over the next five years, and will hit all areas of the business, from field staff to those working in the front office, back office and call centres.

Mr Wray insisted that they would not affect plans to improve customer service levels through upgrades to telemetry and billing systems in the business.

He said: “If you improve the telemetry and billing operations, you generate less calls to the call centre.”

Midlands-based Severn pumps water to 8.2 million customers across the heart of England. They face a 5.7 per cent increase in bills this year.

The group is halfway through a major restructuring that began with the demerger of Biffa last October.

In a trading statement today, Severn Trent said that full-year results for the year to 6 June were likely to be in line with expectations.

Pre-tax profits at Severn Trent Water should be between 1 per cent and 3 per cent above last year’s £400.4 million.

But Severn added that it needed to do more on customer service, leakage and controls. The group is on track to meet leakage targets this year after suffering the highest for four years in 2006.

“Following a challenging summer focused on maintaining water supplies, increased investment in leakage control has delivered a downward leakage trend,” the group said.

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