The Rivers Trust (left) and Surfers Against Sewage (right)
Financial Times: Privatised water companies escape scrutiny from UK regulator, inquiry finds. Ofwat has ‘limited mechanisms’ to check whether infrastructure investment has been carried out
The Conversation: Sewage alerts: the long history of using maps to hold water companies to account
by Darryl Rigby, Content Writer at TradeSparky, a UK-based electrical wholesaler and supplier of solar power panels and batteries.
In the lead-up to last year’s general election, Labour made the environment a defining theme of its campaign, with pledges to cut emissions, create thousands of green jobs, and put the launch of a state-run energy company at the forefront.
Among these commitments, the plan to establish Great British Energy – a publicly owned utility – gained the most attention, which is hardly surprising given the dismal outcomes of privatised services. A combination of rising energy costs, weak flood protection, and rivers choked with sewage has underlined why handing vital infrastructure to profit-driven firms may not have been the best choice!
Privatisation has also proven problematic in industries such as rail and energy. Yet the water sector exposes its flaws most clearly. If left unaddressed, it risks becoming a serious barrier to the UK’s climate ambitions.
When the Thatcher government privatized the water industry in England and Wales in 1989, it promised efficiency gains, higher levels of investment, and improved quality of service. But more than three decades later, it’s clear to see these premises have fallen flat.
Supporters of the move argued that privatised water firms would reinvest profits into infrastructure, spur innovation, and offer more competitive prices. In reality, these companies were established – and remain – as monopolies, as, unlike energy suppliers, they cannot be switched, so competitive pricing was never a reality.
Instead, they have focused on short-term profit and large shareholder dividends, while neglecting vital upgrades. As the country’s aging water system continues to deteriorate, executives collect huge bonuses, and investors have pocketed payouts totaling tens of billions.
Decades of Failure
Since privatisation, water firms have consistently failed to modernise infrastructure, leaving Britain reliant on outdated sewage systems that cannot cope with current demand.
Every day, millions of litres of untreated waste are discharged into rivers, lakes, and seas, causing extensive environmental harm. In 2023 alone, sewage spills more than doubled, climbing from 1.75 million hours to 3.6 million. United Utilities stands out as one of the worst offenders, having released vast quantities of untreated sewage into Lake Windermere between 2021 and 2023.
The problem is so severe that most official swimming spots now fail to meet basic safety standards, with high levels of dangerous bacteria, including norovirus, Salmonella, and E. Coli, detected. Government websites even warn of gastrointestinal illness risks from outdoor swimming, a bleak contrast to Britain’s earlier reputation for clean bathing waters, when EU membership drove substantial improvements through water quality directives.
In 2023, a group of engineers and public health specialists warned that untreated sewage in rivers across England and Wales posed a significant risk, particularly as wild swimming becomes increasingly popular. Professor Barbara Evans of the University of Leeds noted: “One of the most dangerous things in our lives is human faecal waste.”
“With more of it entering the environment, and more people using bathing waters, the risk of outbreaks from faecal-oral transmission increases,” she said.
However, sewage is not the only issue with the UK’s aging water system. As climate change drives more extreme weather, the country’s crumbling flood defences are increasingly inadequate.
Thousands of barriers remain in disrepair. In 2022, Greenpeace’s Unearthed reported that over 4,200 essential flood defences in England were rated poor or very poor. Since then, a series of major storms has merely exposed their weakness even further.
Leaks also remain a pressing concern. Billions of litres of treated water are lost each day through faulty mains pipes. These are system-level failures, rather than domestic leaks, which raise the risk of shortages in hotter summers and add strain to an already stretched supply network.
The Debt Crisis
So, where has all the money gone? Water companies generate billions in revenue, yet infrastructure continues to decline.
A BBC documentary, Our Troubled Rivers, revealed that shareholders have taken more than £70 billion in payouts since privatisation, while critical upgrades have been neglected.
But this is nothing new. Other privatised sectors – such as rail, energy, and postal services – exhibit the same trend of higher prices, declining services, and neglected assets.
At the core is the profit motive. Investors engage only when there are dividends to collect, so companies must offer financial rewards to attract backing. Strip away the incentive, and investor interest disappears, which is why promises of reinvestment and innovation are difficult to believe.
Financial mismanagement has also reached alarming levels. Thames Water, the largest supplier in the UK, recently needed a £3 billion government loan to stay afloat, despite amassing around £20 billion in debt. Its ownership includes foreign pension funds and investment groups, which have no interest in putting their money into the company.
Worryingly, Thames Water is not unique. Many other firms are in equally precarious positions: United Utilities (£8.2b), Southern Water (£5.7b), Severn Trent (£6.3b), Anglian Water (£6.7b), Yorkshire Water (£6.1b), Northumbrian Water (£4.5b) and South West Water (£2.5b) are all heavily indebted.
Much of this borrowing has funded dividends and buyouts rather than long-term investment. Reliance on private debt markets has left companies exposed to interest rate rises, making it harder to prioritise essential works. Yet despite their fragility, many still reward shareholders and executives handsomely.
In this industry, abject failure comes with some lucrative rewards.
Labour’s Climate Goals
In December 2023, Keir Starmer outlined his six-point “Plan for Change”, which included a pledge to deliver 95% clean energy by 2030 – a target more ambitious than anything laid out by previous governments.
This complements Britain’s existing Net Zero target for 2050, signalling Labour’s determination to place the UK at the forefront of clean energy leadership.
Yet there’s little doubt the issues facing the water sector will make it difficult to achieve these goals. Water treatment accounts for around 6% of national energy consumption, meaning the industry can either support or undermine progress.
Leakage is the most visible issue. Treating and pumping water requires large amounts of energy, so every litre lost through faulty pipes means more emissions and added environmental costs. Upgrades such as smart meters, automated leak detection, and modernised pipe networks could bring significant savings in both energy and water use.
Sewage treatment also consumes vast amounts of energy, with many plants still dependent on fossil fuels. Some facilities have started using energy recovery systems that capture energy from sewage sludge, alongside renewables like solar and biogas. But adoption remains patchy, so more substantial investment and regulation are required if this is to truly take off.
Healthy rivers and wetlands offer more than aesthetic value; they serve as natural carbon sinks, helping to purify the environment. Pollution from untreated waste undermines this, making clean-up efforts crucial if Britain wants to stay on track environmentally.
Obstacles
If water companies adopted modern green technologies – from advanced anaerobic digestion and energy recovery to solar-powered treatment and AI leak detection – they could help cut emissions and protect resources. Yet given their record and worsening finances, a voluntary shift seems unlikely, which is why Ofwat and the government need to push harder.
The national regulator is responsible for oversight, but it has been widely criticized for allowing pollution, excessive charges, and poor management without consequence. The body must take a tougher stance, imposing harsher penalties for breaches and compelling firms to invest appropriately.
But given the depth of the crisis, it is fair to question whether regulation alone can fix it, or whether public ownership is becoming unavoidable.
Opponents of renationalisation often argue that the cost would be too high, as the government would need to buy back private stakes. Yet when taxpayers are already funding bailouts and dealing with the fallout of failing infrastructure, that argument looks increasingly weak.
Public ownership would enable the operation of water services for the public good, rather than shareholder gain, with profits reinvested in infrastructure rather than distributed as dividends. It would also bring greater transparency and accountability, with clearer responsibility for failures and more emphasis on long-term environmental goals.
Scotland’s public water model, for example, operates without shareholder pressure and has avoided many of the scandals seen in England and Wales.
Still, nationalisation comes with challenges. Taking over heavily indebted firms would saddle the public with liabilities exceeding £60 billion. Managing such a change would require significant government borrowing or creative solutions, such as phased buyouts, public-interest companies, or not-for-profit trusts.
Another route might involve tighter financial regulation, dividend caps, linking executive pay to environmental outcomes, and ring-fencing infrastructure spending.
Ultimately, whether through renationalization or a reformed private system, what matters is building one that, for the first time in 40 years, prioritizes public health and sustainability over private profit.
Darryl Rigby, Content Writer at TradeSparky, a UK-based electrical wholesaler and supplier of solar power panels and batteries, wrote this post.
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