England’s Water Firms ‘Lack Finances’ To Deal With Sewage Spills

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One of the hottest topics at the moment where England’s water crisis is concerned is the amount of sewage spillages that are taking place around the country, with the most recent data from the Rivers Trust showing that over 350,000 such spills have taken place over the course of two million hours thus far.


In May this year, the situation was deemed so bad that industry watchdog Water UK issued a national apology on behalf of the water industry and said it would be taking steps to “put things right”, with the first of these being a £10 billion investment fund for a new National Overflows Plan to modernise the sewer system, which has been in place since Victorian times.


However, a new report from the Corporate Accountability Network (CAN) and Sheffield University has just suggested that water suppliers in England are now “environmentally insolvent”, in that they don’t have sufficient financial backing to raise the £260 billion required to tackle sewage spillages head on, the Guardian reports.


The study reviewed the accounts of nine major water suppliers around the country and found that the estimated costs of £10 billion over a seven-year period to end sewage discharges were inadequate.


Furthermore, the Environment Agency’s £56 billion over 27 years was also an underestimation, with a House of Lords assessment indicating that £260 billion of investment would be a more accurate representation of what is required.


An analysis of the accounts of the nine water companies in question show that less than £4.6 billion between them has been invested a year on average over the last 20 years.


What’s more, all the money funding the infrastructure investments was paid for with borrowed money, rather than being funded by shareholders. Instead of using the profits for reinvestment, all profits over that same period of time were taken out in the form of dividends.


Lead author of the report professor Richard Murphy from the CAN calculated the net value of water firms as £13 billion, with his analysis indicating that unless price increases are brought in, the industry will lose nearly £16 billion annually to deal with sewage-related issues, in large part because of increased interest costs.


The report concluded: “As a result, we think that these companies are environmentally insolvent. That is because we do not think they will be able to raise the finance to ensure that they can meet their contractual commitments to deliver clean water without polluting our rivers and beaches.


“To address this issue, we suggest that the companies be nationalised without compensation, We suggest that to raise the required capital to fund clean water the government should issue new bonds to be made easily available to the public paying competitive interest rates.


“These should be tax free like ISAs to cover some of the costs we suggest progressive water charges.”


Soaring debts


Of course, public outcry is largely inevitable where the state of the nation’s rivers, lakes and streams are concerned and pollution levels are a serious cause for worry, but what is exacerbating the issue is the mountainous debts being accrued by water companies and the lack of investment in infrastructure, even as large dividends are paid out to shareholders .


Thames Water has hit the headlines over the last week or so, amid concerns that the company could collapse under a pile of debt amounting to £14 billion. The supplier has been in talks with the government to secure additional funding as part of a bailout package, with the firm taken into temporary public ownership if further finance cannot be found.


However, according to the BBC, shareholders in the company have just agreed to provide an additional £750 million in funding to stave off the threat of government control.


Speaking to the Today programme, new interim joint chief executive Cathryn Ross, (taking over from former chief executive Sarah Bentley, who stood down in a surprise move at the end of June), stressed that Thames Water is not anywhere near requiring government intervention.


She explained that the firm has access to £4.4 billion in cash and credit facilities, saying: “That’s absolutely enough to pay everything that we think we need to pay this year, next year and into the future.”


However, the £750 million that investors have agreed to deliver between now and 2025 is below the £1 billion that the firm had been looking for, while these funds are also dependent on the company being able to improve its business plan and breathe new life into Thames and its operations.


And all this comes as the Environment Agency’s annual assessment – published on July 12th – revealed that in 2022 Thames Water had its worst record for serious pollution incidents in nearly ten years.


In fact, the report revealed that just two of the nine water suppliers in England – Thames Water and Anglian Water – were responsible for over half of all serious pollution incidents last year.


Taking the water sector as a whole, total pollution incidents increased, rising almost eight per cent to surpass 2,000 cases in 2022, the first rise since 2019.


Alan Lovell, chair of the Environment Agency, commented on the results, saying: “Regulators, water companies, government, NGOs and many others all want the same thing: better environmental outcomes, including cleaner rivers and seas. We need to work together and take collective responsibility to achieve it.


“While there have been some modest improvements, it is unacceptable to still be seeing this level of pollution. We have seen a distinct culture shift from the water industry in recent months and that is welcome – but that must translate to profound, long-term change.”


To help drive this change, the government has also just announced that new laws will be introduced to scrap the cap on civil penalties, which means that polluters will now face unlimited penalties for environmental breaches such as illegal storm overflow use, hazardous waste disposal and so on.


Interested in finding out more about water efficiency? Get in touch with H2o Building Services today to see how we can help.