David Arculus: regulators must be more proactive

"Regulators and governments will need to address these impacts more proactively in the future than they have done to date."

The warning comes three days after the collapse of inter-governmental talks aimed at curbing emissions of greenhouse gases, which are widely believed to be behind the current changes in global weather patterns.

But Severn Trent said its research did not prove the link between greenhouse gases, such as carbon dioxide, and climate change.

"We are not so much concerned with finding out what the cause of climate change is as dealing with its effects," company spokesman Steve Hodgson told BBC News Online. "And we have to deal with those now."

Future shortages

Demand for water in the Midlands is set within 30 years to exceed the supplies that Severn Trent can guarantee, Mr Hodgson said.

Results snapshot

Turnover: 790m (up 5.7%) Profit: �186m (down 17.7%) Closing 14 depots in merger of Biffa and UK Waste Major divisions: Water: profit �169.1m (down 19.8%) Waste: profit �15.8m (unchanged) Lab and water services: profit �11.8m (up 35.6%) Figs for half year to end of September

Yet the development of measures, such as a reservoir, needed to offset the rise can take decades to implement.

"We need to start planning and talking now. We cannot have people suffering flooding or water shortages in 2020 saying 'what have you been doing for the last 20 years'."

The private sector, pressurised by customers and the government, is taking environmental matters increasingly seriously, Tuesday's results statement, for the six months to the end of September, said.

The market for environmental services in the UK has reached �8bn, said Mr Arculus, who is overseeing a diversification of Severn Trent from the highly regulated water market into waste management, recycling and IT.

Huge market

"A significant business opportunity is emerging to provide an integrated range of environmental services to industrial and commercial customers," he said.

The firm blamed price caps imposed by water regulator Ofwat for a �40m drop in profits over the six months, compared to the year before.

East Anglia-based AWG last week said the level of regulation in the sector may prompt it to spin off the water services business, Anglian Water, around which it was built.

Shares in Severn Trent closed 2p lower at 786p in London on Tuesday.