Somerset Council’s waste collection contract is at risk after Suez disclosed ‘significant losses’ and said it may have to end the deal early.

The local authority has agreed for its chief executive to negotiate with the company to establish the minimum increase to annual payments it would accept to keep providing services.

The contract, which is worth around £24m a year, began in April 2020 and runs for 10 years.

A report to Somerset’s executive says there have been ‘several commercial challenges’, including Covid and the national driver shortage. Some issues were discussed away from the press and public.

It says Suez has ‘disclosed significant losses on this contract to the extent it has become unviable’ and may end the contract with three months’ notice if a suitable settlement cannot be reached, but would have to pay some damages that arise.

Somerset will consider the company’s final offer alongside other options, including setting up a local authority trading company and re-procuring the contract.

A council spokesperson said: ‘Our options are limited and all of them come at extra cost, so our focus is on securing the best deal for the people of Somerset.

‘That means looking carefully at all available options to compare potential costs and ensure any disruption is kept to a minimum.’

The south west regional director for Suez Recycling and Recovery UK, Mark Taylor, said: ‘These past four years have been a time of unprecedented change, including the pandemic and the HGV driver shortage that followed, and we are working through the impacts of this on the contract with the council.

‘As we do this, we are very mindful of the financial pressures that Somerset Council is facing, and we are actively working with council officers to agree a way forward.’