here was a time when privatised British water companies were as unpopular as they are now. During the hot summer of 1995, the managing director of Yorkshire, Trevor Newton, achieved notoriety when he urged customers to use less of his company’s product by issuing a motivational message: “I personally have not had a bath or shower for three months.”
To make privatisation happen in December 1989 – a month after the fall of the Berlin Wall – the government cancelled all the long-term debt owed by the previous water authorities and injected cash into the new companies as a “green dowry”. Such exercises meant the net proceeds to the Treasury, even after selling the companies for a total of £7.6bn, was roughly zero.
The companies were happy to play the debt game. Some, flush with rising share prices and access to cheap capital, caught the diversification bug in the go-go 1990s. Thames won contracts to run water networks as far away as Indonesia and Chile. Welsh Water lost a packet by buying hotels and country clubs. In 2000, Anglian Water bought a construction company.Then there were the takeover games, which began when the government cancelled its golden shares in the 10 companies in 1995.
Jonson Cox, who had spells running Yorkshire and Anglian before he was chair of Ofwat from 2012 until 2022, told a House of Lords committee soon after leaving the regulator: “In the 2000s, investment banks began to realise that there was an opportunity to acquire the water company assets and to put significantly more leverage on to those capital structures. I was not at Ofwat at that time. I have disagreed with that approach and I think it is very unfortunate that it happened.