Dirty water: there are more important things than profit
The frequent failure of sewage systems and resulting pollution of our rivers and coastal waters has thrown a spotlight on the shady world of private equity acquisitions of public utilities.
The Guardian reports: ‘Part of the problem is that over the intervening 34 years since privatisation it has become difficult to unravel who is responsible for what. Only 10% of English water is UK-owned; 72% is controlled overseas through complex and opaque ownership structures; and the final 18%? No one is quite sure who owns it.’
Debt up
Financial intelligence agency, Bloomberg, said of England’s water system: ‘being a monopoly supplier of water is about as safe a business as it is possible to imagine. You are selling a commodity that no one can live without to a captive customer base that has nowhere else to go, at regulated prices designed to ensure you can make a profit (and which have risen far faster than inflation since the industry was taken out of public hands in the late 1980s). To fail to make money from this setup would be quite an achievement. Such is the magic of leverage.’
That ‘leverage’ has involved using debt while stripping out profit to reward shareholders. The Guardian continues: ‘What you can be sure about is that, if you live in England, on average, you pay 20% of your water bill to service debt raised to reward mostly overseas owners rather than maintain our crumbling water network.’
Investment down
Analysis by the Financial Times finds that investment in sewage infrastructure has fallen while the population has grown. Spending on wastewater infrastructure has fallen in real terms from an annual average of £3bn in the 1990s to £2.7bn in the 2020s despite a 16 per cent increase in the population in the past two decades. The result is a sewerage system that is often overwhelmed and a water supply network that teeters on the edge of crisis.
Inadequate and skewed regulation has played a large part. Australian infrastructure firm Macquarie owned Thames Water between 2007 and 2017, leaving it with £2bn of debt, while paying its investors, according to one analysis, on average between 15.5% and 19% in dividends a year. The Govt regulator, Ofwat, instead of making changes to a system that was supporting such poor levels of investment, later approved a new £1bn equity takeover of Southern Water by none other than Macquarie.
Environment pays the price
“What’s paid the price,” says Giles Bristow, CEO of campaigners Surfers Against Sewage “is the environment, biodiversity, the state of our rivers and coastline, and consumers – we have all paid for this, for a service that we were never getting properly and fully.”
This sorry tale has significance for residents of Uttlesford. Thames Water, which has been much in the news, is the sewage operator in parts of the south of the district. Most of the district’s sewage function is handled by Anglian Water, but it too has financial exposure as does our supplier of drinking water, Affinity.