English water companies have paid shareholders almost £17 billion in dividends in the last 12 years, according to University of Greenwich research.
The report adds that this has driven up the average cost to every household by an average of £62 per year over the last 12 years. And since privatisation in 1991, the companies have paid out about £61.8bn (in 2021 prices).
Professor David Hall from the university’s Public Services International Research Unit (PSIRU) said: “These companies have paid out on average £1.4 billion, which is much-needed money that could be invested back into the system.
“Since privatisation, companies have given out almost half as much for shareholders as they have spent on upgrading and maintaining their water and sewerage systems – about £57bn compared to £132bn (1991-2018).
“This is despite the promise that privatisation would bring more money for investment. In reality, the consumer has paid for almost all investment by these companies.
“The companies have borrowed large amounts of money, building up a large pile of debt and interest. This debt has not been taken on to finance investment, but to finance the payment of dividends. These companies have not invested a penny in equity since privatisation, even though they were debt free because the government wrote off their debt at the time. They now owe £52bn between them.”
Professor Hall points to Scotland as an example of how public ownership of water and sewerage can provide better value for customers.
“Public ownership can deliver more investment at a lower cost to consumers,” he added. As my colleague Karol Yearwood pointed out, Scottish Water has invested nearly 35% more per household since 2002 (average £282 per household per year vs England’s £210 per year). The same investment by the 10 English companies would have seen £28bn more spent on infrastructure.”
The report - Water and sewerage company finances 2021: dividends and investment – adds that Anglian Water paid out the most to shareholders from 2010 to 2021 (£5.18bn), followed by United Utilities (£3.08bn) and Severn Trent (£2.32bn).
Government reports suggest that dealing with sewage flooding would cost between £150bn and £650bn, but Professor Hall believes these figures are “a guess at the cost of constructing a completely new, separate storm water drain system throughout England”.
He adds that, while investment is needed, it is far short of a new nationwide network.
“If the private companies took this issue at all seriously, each of them should have a properly costed programme of specific measures,” said Professor Hall.
“If the companies do not have figures on such an important issue which has been a problem for decades, then the system – including the regulator - is failing to deliver its basic public function.
“As it has done with rail, the government should find a way of bringing the water and sewerage systems back into public ownership under public authorities. As this paper shows, publicly owned systems – such as Scottish Water – have a proven track record of higher investment and lower costs to consumers.
“No other country in the world has adopted the English system of private companies owning and running regional water and sanitation systems.
“The overwhelming majority of the world – including the USA – runs water and sanitation services through the public sector. Only a small minority of cities – less than 10% - subcontract private companies to run water services, always on a fixed-term contract, and under the scrutiny of an elected public authority. The trend is away from such outsourcing. Sewerage is very rarely outsourced to private companies.
“And the public sector can raise money far more cheaply. It costs £2.1 billion per year more in England for private dividends and interest than if the companies were in the public sector - £93 per household.”
Paper here: https://gala.gre.ac.uk/id/eprint/34274/
