Privatised water: a system in need of repair?


England’s privatised water industry is a failed system that only benefits shareholders, a new report from the University of Greenwich has found.

England's privatised water industry is a failed system that only benefits shareholders, a new report from the Public Services International Research Unit (PSIRU) at the University of Greenwich has found.

The report – "The Privatised Water Industry in the UK: An ATM for Investors" – shows that the 40% real increase in English water bills since privatisation in 1991 has not been due to higher investment, as claimed by OFWAT and the companies themselves, but is a result of ever higher interest payments on £47 billion of debt, accrued due to £50 billion paid in dividends to shareholders.

Comparing the private English water and sewerage companies with the publicly owned Scottish Water (created in 2002), the report reveals that:

  • In Scotland, real bills are still the same as they were 17 years ago, whilst English bills have increased by over 16% in real terms over the same time period.
  • Publicly owned Scottish Water invests over one-third more on a per capita basis than the private English companies - £282 per household per year over the last 17 years, compared with only £210 per household per year in England - contradicting claims by the English companies and their regulator, OFWAT, that price rises in England have been due to high levels of investment. 
  • Since 1991, the surplus money available to the English companies to pay dividends averaged £0.15 billion per year, but in every single year except 1995, the dividends actually paid to shareholders far averaging almost £2billion. The gap was bridged by borrowing year after year, building the £47billion debt mountain that exists today.

Speaking about the findings, Professor David Hall, PSIRU, University of Greenwich said:

"This report clearly shows that the high prices and high debts of the English water companies are not due to high investments. The companies could have funded all of their operations and investments from customer bills, without taking on any debt whatsoever. The £47 billion of debt, and the interest we pay on it, is simply down to a systematic extraction of shareholder payouts far in excess of any available cash surplus.

"This system is not sustainable and seriously disadvantages consumers. They have not been helped by a fog of misleading statements by both water companies and the regulator OFWAT. The report further strengthens the case for taking water back into public ownership with strong democratic oversight, as in most European countries."