of water utilities in England and Wales, more than 30 years ago, now looks like a rip-off. Private-equity firms have loaded some water companies with debt. That helped juice their returns but left them financially fragile. While many water bosses made out like bandits, raw sewage was being dumped in rivers and on beaches. The companies, notably Thames Water, are now seen as the unacceptable face of Britain’s utility privatisations.
Two separate problems with privatised water are often mixed up. One is the fragility of some firms; the other is a lack of spending on infrastructure. The first is being talked about because Thames Water, the largest water company, is in trouble. It has £16bn of debt and, as much of that is linked to inflation, faces a growing interest bill. Shareholders have coughed up only £500m of the £1.5bn it needs to turn the business around.
It is true that dividends of £65.9bn in the years between privatisation in 1989 and 2022 have been extracted from companies. However, the fallout from this financial engineering lands not on current bill payers, but on the companies’ bondholders. If any water companies fail, that need not affect the public, because shareholders and bondholders should pay the price.
The second, separate, problem is the lack of investment in infrastructure. Climate change and a growing population mean that the south-east of England urgently needs more reservoirs. Across the country, water companies should be spending more to fix leaks and fit more households with water meters. They also need to upgrade their facilities to stop sewage getting into rivers.
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