An MP has called on the owners of a water company embroiled in a parasitic outbreak in Devon affecting thousands of residents and businesses to relinquish dividend payments to shareholders.

Pennon, which owns South West Water, has increased its dividend payout despite being handed a record fine last year for sewage spills.

The company is also dealing with an outbreak of the cryptosporidium bug in the Brixham area, which has affected 16,000 households and businesses since May 15.

The UK Health Security Agency said the number of confirmed cases had risen to 57 as of Tuesday, a number which is expected to increase over the next few days.

Anthony Mangnall, the Conservative MP for Totnes, said Pennon should suspend the dividend payments or the chief executive should step aside.

“Obviously it’s hugely disappointing at a moment where the public’s confidence in South West Water is at an all-time low they’ve decided to go ahead and pay out dividends,” he told the PA news agency.

“I have called for Pennon to suspend their dividend offering, which they can do, which they are able to do.

“I have also suggested that if they fail to do so, the chief executive should take the rap for this.

“I’m not against dividend payments in general, I’m just saying that at this point in time, where the public have been so badly let down, that we really consider how these dividends are paid.”

Mr Mangnall said if Pennon did not act then water regulator Ofwat should intervene using its existing powers.

“I think Ofwat is well within its powers under the measures that have been passed already which are linked to poor performance,” he said.

“I think we should be clear. They reduced their dividend payments from 44p per share to 30p per share on the basis that they were fined £2.2 million.

“I don’t think that’s an acceptable way of approaching it actually. I think they need to take stock of why they are paying that dividend and when.

“They should be paying out dividends when people have confidence in their ability to deliver for the consumer and deliver good value for money.”

Mr Mangnall also urged holidaymakers to come to Brixham during the bank holiday weekend and half-term as the area was open for business.

“Brixham is open for business and we look forward to welcoming people back over the bank holiday weekend,” he said.

“It’s got safety measures in place and people can have a happy, safe and fun time in Brixham.

“This issue is going to be resolved in its entirety in the next few days. I am now keen to get Brixham back on its feet.”

Pennon said it is paying out around £3.5 million in compensation after the outbreak of the waterborne disease that can cause diarrhoea and vomiting.

Two people have been taken to hospital while hundreds of others have fallen ill as a result of the outbreak, which South West Water has said was most likely triggered by animal faeces entering a damaged pipe.

Pennon has increased customer compensation to £215 for those affected, adding that normal service has now been restored for 85% of customers.

Michael Smith, co-owner of the Venus Cafe near Brixham, said the water companies needed to take a dividend “holiday for a couple of years” and invest in infrastructure.

“While I totally understand that investors need some return otherwise they won’t invest, I think the amount of investment required right around Britain they probably need to take a holiday for a couple of years so that they can sort things out,” he said.

“I don’t know what the long-term impact will have. It is half-term next week, whether that is going to keep people away because they are still concerned with catching the bug.

“It is normally a phenomenally busy week and that really will be the proof in the pudding to be honest.

“We have two other cafes so we can sort of measure Broadsands against that.”

Pennon’s figures also showed underlying operating profits lifted 8.6% to £166.3 million in the year to March 31.

Group chief executive Susan Davy said: “Whilst the results we are announcing today are based on our performance for the last financial year, we are 100% focused on returning a safe water supply to the people and businesses in and around Brixham.

“Our absolute priority continues to be the health and safety of our customers, and our operational teams are working tirelessly around the clock to deliver this.”

The firm said the move to reduce the total dividend payout to investors by 0.84p a share to 44.37p showed “we are listening, clearing the way for long-term shareholder value”.

However, the payout was still 3.8% higher than the previous year.

Pennon’s figures showed on a statutory basis, pre-tax losses widened to £9.1 million for the year to March 31, against losses of £8.5 million the previous year, as it faced a jump in debt costs.

The group, which also owns Bristol Water and recently bought SES Water, saw its debt pile swell to £3.5 billion as of the end of March, up from £3 billion a year earlier.