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Greenwich University Calls For Water Industry Nationalisation
Calls have been issued for nationalisation of the UK’s water industry by David Hall, visiting professor at the Public Services International Research Unit at the University of Greenwich, who has suggested that a step change is now required in how the sector is run, with the system reversed and managed in the same way as the rest of the world: “Through public authorities and [taking] it back [into] the public sector”.
His comments come off the back of new research from the university, revealing that shareholders from some of the biggest water companies in the UK have withdrawn tens of billions of pounds but failed to invest in infrastructure, the BBC reports.
It was found, for example, that £85.2 billion has been taken out of ten of England’s water and sewerage firms by investors since privatisation of the industry some 30 years or so ago.
According to the study, between privatisation in 1989 and 2023, shareholder investment by the largest firms fell by £5.5 billion when inflation was taken into account.
Over the same timeframe, the amount of profits available for investment in the business fell by £6.7 billion in real terms. And the total amount paid out to shareholders via dividends rose to £72.8 billion when adjusted for inflation.
However, industry regulator Ofwat refuted the figures, saying that while it is certainly in agreement that companies need to change, the fact remains that “huge investment” has been seen in the sector, totalling more than £200 billion.
And industry representative Water UK observed that investments in the industry are now double the annual levels that were seen prior to privatisation.
The industry has been under increasing amounts of pressure over the last few years to improve its water management and invest in upgrading much-needed infrastructure around the country, as water leakage rates and sewage discharges hit the headlines with increasing regularity.
In order to fund these investments, suppliers are now looking to increase customer bills by 33 per cent on average over the next five years.
But Mr Hall suggested that investments on the part of water companies amount to “less than nothing of their own money”, adding that they’re “treating their customers like a cash cow”.
Nationalisation of the water industry
A paper recently published by Mr Hall found that annual savings to households in the UK would come to £7.8 billion if water, energy and Royal Mail were brought into public ownership.
Furthermore, while the Confederation of British Industry (CBI) claims that the cost of compensation of returning shareholder investments would come to almost £200 billion, the study estimated that this total cost would come to £49.7 billion… which is significantly lower.
It was calculated that the average household would be £142 better off each year because of nationalisation of the energy grid and £113 better off annually if the water industry was nationalised.
Mr Hall said: “Based on intensive empirical research, this paper shows that public ownership of utilities would amount to annual savings of just under £8 billion – £315 per household per year – even after taking account of the cost of compensation. Nationalisation would pay for itself in less than seven years.
“Rather than costing the country nearly £200 billion in compensation to investors – a claim made by the CBI last month – nationalisation could cost less than £50 billion if shareholders are compensated for the amount they invested.
“There is no law requiring that they be paid the market value and it is up to parliament to decide on a case by case basis the appropriate amount of compensation.”
However, as Water UK asserts, public ownership of the water industry led to underinvestment in infrastructure and sustained water pollution, which resulted in a drop in river and tap water quality. After privatisation, investment in the sector doubled.
As the organisation sees it, one of the big issues with nationalising the sector is that the responsibility for funding would be put back onto the government and taxpayers, which would see the industry compete with other essential services, such as hospitals and schools.
Late last year, water companies submitted their five-year plans to Ofwat, with a combined amount of £96 million due to be invested in water infrastructure, a hike of 90 per cent on the current period and the biggest in the history of the sector.
Over the last 30 years, investment has climbed by 84 per cent, with pipes leaking more than a third less water than previously and the UK boasting some of the cleanest and safest drinking water in the world.
However, part of the problem is that a lot of the infrastructure dates back to Victorian times and is now reaching the end of its life cycle, increasingly unable to meet the pressures of population growth and climate change, while failing to meet public expectations relating to the environment.
The key now, with bill hikes on the horizon, is to make sure that people see the results of paying more. According to Water UK, if these requested increases are approved, they will help drive construction of infrastructure like reservoirs and desalination plants, as well as new cross-country pipes and storm overflow reduction.
It will also be interesting to see what happens after the General Election, with a Conservative victory looking less and less likely as time goes on. Keir Starmer has been urged to strongly consider nationalisation of the sector… so it’s very much a case of watch this space.