The deal, agreed for an undisclosed amount, will create the third biggest company in the UK non-domestic water market, with a combined market share of more than 10 per cent.
Southern Water said the decision will enable it to “focus on additional service improvements for its household customers”, which represent 95 per cent of its retail business.
The two companies assured that “no compulsory redundancies” are being made as a result of the decision.
As part of the acquisition, a number of Southern Water’s account managers will transfer to Business Stream to ensure continuity of service to and maintain existing relationships with customers.
In addition, as many as 40 new jobs will be created at Business Stream’s Edinburgh headquarters to support the expanded operation.
Business Stream chief executive Jo 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, gained from eight years of operating in the highly competitive Scottish market.
“The addition of the Southern Water’s customer base provides Business Stream with increased scale which will enable us to continue delivering a first class service, to invest in initiatives which will enhance that experience, and to deliver savings for all our customers.
“By creating the third largest UK non-domestic water supplier, we have also forged a bright future for our existing workforce, creating new jobs and building a foundation for growth when the English market opens fully.”
Southern Water chief executive Matthew Wright said: “After looking carefully at the options available to us we have decided to sell our non-household retail business to Business Stream, a specialist retailer that has been at the forefront of the competitive market in Scotland for eight years.
“Business Stream’s track record of delivering savings and value-added services to customers gave us confidence that transferring our non-household customers to their care would be the best solution.”
From 1 April 2017 around 1.2 million businesses and public bodies in England will be able to choose their water supplier, an option only currently available to the largest users. It will link to the existing market in Scotland, which was created in 2008 as the world’s first non-domestic water market.
The government introduced retail exit to the Water Act 2014 at the eleventh hour, following an sustained lobbying effort by peers in the House of Lords, regulators and some water companies, who all believed it that the proper functioning of a competitive market required companies to be able to exit if they wished.
Southern Water is the second water company to exit, after Portsmouth Water’s announcement in January.
Scottish supplier Castle Water took on the retail activities for business customers on behalf of Portsmouth from April 2016 and, in April 2017 it will be handed full responsibility.