The tiny group controlling England’s water industry
Charlie Kimber
A hard-hitting new study of water industry fat cats shows why the industry must be renationalised. It also raises serious questions for a future Labour government.
Water supplies in England are controlled by nine major private firms which are regional monopolies—Anglian Water, Northumbrian Water, Severn Trent, South West Water, Southern Water, Thames Water, United Utilities, Wessex Water and Yorkshire Water.
Shareholders in these firms profited by £6.5 billion between 2013 and 2017. Nearly a third of the money people spend on water bills goes directly to investors and banks.
Water firms can rely on people paying water bills regularly, and they use complicated debt structures to make huge amounts of money.
Meanwhile, the poorest households struggle to pay their bills.
Since privatisation in 1989 household water bills have increased by 40 percent above inflation.
That’s why it’s right to call for water to be taken back into public ownership and to eliminate fat cats from the industry. Most trade unions and the Labour Party back the “take back the tap” campaign.
Shareholders
How would it happen? It would mean taking on not just the bosses of the nine firms, but also the shareholders who own these companies.
These are the people who have extensive control over the direction of those firms, and a right to receive cash returns from profits made.
An important study from Corporate Watch researchers looked in detail at who owns the water companies. “English water is owned by a variety of big players in the global economy,” it found.
“Just 20 investors own two thirds of England’s water and sewerage supply.
“Not exactly the ‘shareholder democracy’ promised when water was privatised.”
And these owners are much more deeply embedded than the rail shareholders because of the way Margaret Thatcher and Labour’s Tony Blair rigged the system.
Corporate Watch said, “The companies themselves own all the pipes, reservoirs, treatment plants and so on that together make up the water and sewerage system.
“Many other places just contracted out management of the system but this would have been far too half-hearted for the Thatcher government.
“To make the water companies even more attractive to global capital, the New Labour government decided in 2002 to amend the licences under which they ran the supply.
“As a result, the companies cannot lose those licences to a rival unless the government has given them ‘at least 25 years’ notice’.”
This means anti-privatisation campaigners—or a Labour government—can’t just wait for the companies’ licences to end to replace them.
The current contracts have to be broken. Either this would mean buying out the shareholders—which the companies estimate would cost £44 billion—or taking them back without compensation for the rich.
Why should those who have received so much be given another penny?
Force fat cats out—and don’t let them leech more
Over 80 percent of people support public ownership of water.
Labour’s policy if elected is to set up regional, publicly-owned bodies that would take over ownership of the existing water and sewerage firms.
The boards of these will be made up of councillors from local councils in the region.
They will also include three trade union representatives, and three representatives of community, consumer and environmental bodies.
Workers’ rights will be guaranteed. What about the fat cats?
Labour said, “Existing shareholders will be compensated with bonds. This is cost neutral to the public purse, because the public sector exchanges a liability (the bond) for a profitable asset (the water companies).”
It’s unclear whether these bonds would generate income—therefore still leeching off the public—or could be sold, again draining off cash.
Either would be unacceptable.
But in any case these firms and banks wouldn’t go easily.
As Corporate Watch said, “Many of the investment funds invest huge amounts in company and government bonds.
“A post-privatisation supply would likely look to fund itself by borrowing from the capital markets.
“But that would mean trying to raise capital from many of the same funds that are currently water company shareholders.
“Would Blackrock and the others play ball? Or would they refuse to lend, or demand higher interest rates—and tell colleagues in other funds to do the same?
“That would have knock on effects for the cost of the new supply.”
To carry out what seems quite a modest change, Labour will need to confront and defeat the bosses, not compromise with them.
Crucially it will require pressure from outside parliament.
The investors raking it in
At the top of the list of water profiteers is the CK Hutchinson group. This conglomerate is run by the family of Li Ka Shing, who at the last count was the 23rd richest person in the world.
CK Hutchinson is run from Hong Kong but registered in the Cayman Islands, one of the many tax havens used by the group. It owns 7 percent of the English water industry. CK Hutchinson has outright ownership of Northumbrian Water plus a small stake in Southern Water. It also has interests in energy, ports, retail and the 3 mobile telephone network.
The Commonwealth Bank of Australia owns 4 percent of the water industry, as does both the government of Singapore and Malaysia’s YTL Corporation.
There are more surprising shareholders. The biggest wholly British-owned shareholder is the USS—the pension scheme for university staff. It owns 2 percent of the industry.
Its members should demand that the scheme should disinvest from water—and any other privatised industries.
Where all the cash has gone
Shareholders have profited enormously from England’s privatised water companies between 2013 and 2017.
They made a total of £6.5 billion:
- United Utilities £1.2 billion
- Northumbrian £999 million
- Yorkshire £412 million
- Severn Trent £1.1 billion
- Anglian £428 million
- Wessex £533 million
- Thames £392 million
- Southern £622 million
- South West £789 million
