SCOTTISH Water’s business supply arm has made a grab for a big slice of the English market by agreeing to acquire the non-domestic customers of Southern Water.

The deal will allow Business Stream to double its customer base by taking on 105,000 organisations that are supplied by Southern Water from April, when the non-domestic market in England is opened fully to competition.

The price of the deal was not disclosed but it looks likely to have been in the millions.

Southern Water’s business represents around ten per cent of the market in England in terms of customer numbers.

The deal will make Business Stream the third biggest non-domestic supper in the UK behind Thames Water and the Water Plus venture formed by United Utilities and Severn Trent Water.

Business Stream has made clear its ambitions to build a big business south of the border. The company believes the experience it has gained since the market in Scotland was opened to competition in 2008 will give it an edge over rivals.

Chief executive Johanna Dow said: “The acquisition of Southern Water’s customer base provides us with a springboard for growth ahead of the English market opening next year. The new market will create huge opportunities for Business Stream. We are ideally placed to secure market share by leveraging our knowledge, capability and experience.”

Ms Dow noted that the deal would give Business Stream immediate scale in the English market. It will bring a big customer base spread across southern England in an area where Business Stream could hope to win business from rivals such as Thames Water.

She said expansion in England, where the company already supplies some big businesses such as House of Fraser, will also create benefits for the organisation and its customers in Scotland.

The acquisition will allow Business Stream to spread the fixed costs associated with things like property across a bigger number of customers. Ms Dow said this could pave the way to price cuts, without giving an indication of their likely scale.

Business Stream will be able to invest more in Scotland.

It expects to create up to 40 new jobs at its Edinburgh headquarters to support the expanded operation.

Business Stream has seen its share of the non-domestic market in Scotland shrink significantly after it lost a £350m public sector supply contract to Anglian Water in October.

The company would be interested in making further expansion moves in England, through acquisitions, partnerships or by forming joint ventures.

Southern Water chief executive Matthew Wright said the company had decided to sell its non-domestic business to a specialist after careful consideration.

Ms Dow said the firms were in talks for 12 months.

Southern Water has a big domestic business which supplies more than 2 million customers.

The company’s latest accounts show it made £204m pre tax profit on sales of £829m in the year to March 2015.

The accounts of the holding company state around 80 per cent of the business’s water and wastewater services revenue comes from household customers.

This suggests around 20 per cent comes from non-domestic customers.

In Southern Water’s accounts, the company says the liberalisation of the non-domestic market will require it to make significant structural changes to be able to continue to comply with regulatory requirements and to anticipate the shift in the customer base.

The deal will result in a chunk of the English water industry returning to public ownership.

Southern Water was one of 10 regional authorities privatised by the Thatcher government in 1989.

It was acquired by Scottish Power for around £1.7bn in 1996 under the energy firm’s ultimately unsuccessful diversification drive. Scottish Power sold the business to a group of investors which included Sir Tom Hunter’s West Coast Capital in 2002 for £2.05bn.

A consortium that includes Australian and Canadian pension funds and infrastructure investors bought the business in 2007, from Royal Bank of Scotland for £4.2bn.

The consortium noted at the time that Southern Water generated strong cash flow in a regulated sector and had good growth opportunities.

Overseas investors have been very active in the UK water industry and the infrastructure sector.

Roseanna Cunningham, Scottish Cabinet Secretary for Environment, Climate Change and Land Reform, said: “It is good news that Business Stream, as a publicly owned organisation, has concluded this significant deal.”

She added: “We are fully committed to keeping Business Stream in public ownership but it is right that Business Stream takes every opportunity to compete in the commercial marketplace in which it operates.”

Earlier this month Ms Dow said Business Stream remained the biggest player in Scotland with more than 50 per cent of the market after the Anglian Water reverse.

This time last year it had around 80 per cent.