How Thames Water came to be flooded with debt – and what it means for taxpayers
Kate Bayliss, SOAS, University of London
Thames Water is reportedly on the brink of collapse. The UK’s largest water company, well known for its high levels of water leakage, sewage spills, executive pay and dividend payments, now appears to be flooded with debts that it cannot afford to pay.
Those debts have reached more than £14 billion, leading to fears the government – or UK taxpayers to be precise – may have to bail the company out.
The news of Thames Water’s difficulties may have shocked some of its 15 million customers. But as someone who has researched the finances of water companies, I was not entirely surprised. These issues have been a long time in the making, and I raised concerns publicly over five years ago.
When the water and sewage companies of England and Wales were privatised in 1989, the intention was to bring fresh finance and innovation to create efficiency. But in the 2000s, a new kind of financial investor began to dominate the sector.
Our recent research found that by 2021, of 15 English water and sewage companies, nine were owned by “special purpose companies”. These are organisations set up for the purpose of buying water utilities, with owners consisting of a range of private equity funds, pension funds and sovereign wealth funds.
These kinds of investors were then able to use water company revenue to generate significant returns to shareholders. And one way this happens is by hiking up company debts.
Newly privatised water companies had started out with zero debt in 1989. Yet by the end of March 2022, total debt in the sector was at £60.6 billion. In part, the increased debt was used to refinance the companies so that investors could repay themselves part of the original cost of buying the water utility.
Our research shows that Thames Water was the archetype of this model. When it was taken over in 2007 by a consortium led by Macquarie, an Australian investment bank, debts increased over the next ten years from £3.2 billion to £10.7 billion. The proportion of assets funded by borrowing increased to over 80%, while the company paid out dividends of £2.5 billion. The company has previously said that it has a “strict, performance-linked dividend policy monitored by Ofwat”.
Perfect storm
But such high debts are problematic for a water company. First there is the issue of inequality, where customers’ water bills are used to pay down debts that have increased to pay dividends to its owners. And second, as we see with Thames Water, these highly indebted companies are potentially unstable in the event of cost pressures.
What we have now is a perfect storm in which Thames Water’s finances may collapse. A key pressure is inflation, which is pushing up the value of some of the company’s debt at the same time as it pushes up costs. More than half of Thames Water’s debt is linked to inflation, contributing to the uplift in debt value.
Andrey_Popov/Shutterstock
Then there is the cost of improving performance. This has become more urgent after Ofwat, the water company regulator, was given new powers (effective from April 2025) to prevent companies paying dividends if these weaken financial resilience or are not linked to performance.
In 2022, the government set out a plan to tackle the rapidly growing issue of sewage discharge in a £56 billion investment plan. All of this adds up to intense pressure on the company’s finances.
If those finances do unravel, it is likely that the company will be underwritten by the government to keep the taps flowing while a rescue package is put together (as happened with the energy company Bulb).
However, this situation also creates the opportunity for a new public model of water supply, one that treats water not as a private commodity but as part of the wider ecosystem, providing social equity as well as environmental sustainability.
Public ownership need not be a step back to the 1970s. In fact, it would bring the UK into step with most of the modern world, including most of Europe. In Paris, where water provision was made public in 2009 after years of outsourcing, the change is widely considered a success story.
The last 34 years have revealed the fundamental problems with the current system. This crisis is a chance to direct England’s water in a new direction.
Kate Bayliss, Research Associate, Department of Economics, SOAS, University of London
This article is republished from The Conversation under a Creative Commons license. Read the original article.
Water bosses caught colluding with Labour in bid to avoid nationalisation
THE boss of water giant Severn Trent was caught colluding with Labour’s increasingly right-wing leadership to stave off calls for nationalisation today.
In a leaked email marked “highly confidential,” Liv Garfield invited other bosses from across England’s privatised system to a “off-the-record roundtable” discussion on how to maintain the “status quo” amid the potential collapse of Thames Water.
…
Labour leader Sir Keir Starmer committed to state-run utility firms when he ran for the party leadership in 2020, but he has now largely abandoned the pledges, calling for better regulation instead.
Ms Garfield wrote: “While it is clear Labour will not include nationalisation in its next manifesto, they are also not keen on championing the status quo.
“The leadership thinks there is room for improvement and, politically, there is significant pressure to ‘do something’ about utilities.
“Labour is aware we are soft testing various ideas but have asked us to keep it highly confidential so please don’t forward this email.”
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Sue Gray Set To Join Keir Starmer’s Team As Watchdog Gives Green Light
https://www.politicshome.com/news/article/acoba-green-lights-sue-gray-keir-starmers-chief-staff
The Advisory Committee on Business Appointments (ACOBA), which oversees appointments of senior civil servants after they leave their roles, has given the green light for former senior civil servant Sue Gray to join Labour as leader Keir Starmer’s chief of staff.
Wonder if she’s any good at anything & Starmer seems to be poor at spelling, ei? I sometimes wonder if he’s just a bit intellectually challenged tbh but undecided as yet.
Time’s Up
Republished from https://juststopoil.org/2023/06/30/times-up/
Why we are in civil resistance
Our system is killing us. The root of the wreckage we see around us is a broken democracy, not a broken climate. Climate chaos is just a symptom of the endless greed of the powerful – who won’t stop until they’ve trashed even what they need to survive.
This reality is so terrifying that we all want to believe it’s not true. Surely our lives are in good hands, minus a few bad apples. But for more and more people, these last shreds of comfort are going up in wildfire smoke. We’re told to watch the world burn while politicians license new oil – and still obey?
If that makes your head and heart explode, there’s only one place to go: Civil Resistance. It’s the step we take when we definitively turn our backs on the criminals in power, refusing to give them one more second of our time and respect.
All over the world, this is happening. A Glasgow community spontaneously gathers to save neighbours from deportation. The Stop Cop City movement in Atlanta refuses to let the police raze the forest for a vast training complex. People block the subway in New York, in rage and defiance, after homeless black man Jordan Neely was murdered. Just Stop Oil’s partners in the A22 network send shockwaves across Europe – blocking roads, throwing paint over private jets, turning fountains black.
Like these sister movements, Just Stop Oil is clear about what civil resistance means: we no longer consent to a system that doesn’t care if we live or die. A system so dysfunctional it’s willing to sacrifice us to a clique of criminals profiting from shortened lives, hunger and despair. Resistance means we no longer cooperate with a state that holds us in utter contempt, lies to us and treats us as worthless. If the State has no regard for us, we owe it nothing in return.
The good news amongst all this darkness is that civil resistance works. It’s not a miracle cure by any means, but the balance tips decisively in its favour. It’s got rid of dictators like Serbia’s Slobodan Milosevic, brought down segregation in the US, won votes for women, removed the British from India, and helped Polish trade unionists free themselves from Soviet oppression. Just Stop Oil could be just months away from joining this roll of honour.
The techniques of civil resistance can include strikes, boycotts, blockades, cultural disruption and occupations. Its results are just as varied. Civil resistance sometimes wins by sparking mass mobilisation, compelling people to leave the sidelines and join in. Sometimes by dividing the State against itself, winning over police and the judiciary. Victory can also come from raising the costs of keeping a system going – until it’s easier for the oppressor to give way. But behind all these tactics and objectives is the absolute withdrawal of consent from a system that’s failing in its duty to provide protection, care and justice for ordinary people like us.
Here, this failure is stark. Our government takes our hard-earned money, via taxpayer subsidies, and pours it into new oil and gas projects, which will lead to misery, deprivation, suffering and death. It breaks its own climate targets, marching us towards social, economic as well as environmental collapse. It lies to us and gaslights us – telling us new oil will cut our energy bills when we all know it’s going to be sold for profit on the global market, at a global price. As one of our spokespeople, Emma Brown, put it so clearly in an interview: ‘The British public isn’t silly.’ We know we’re being lied to. We know we’re being thrown to the wolves.
If you can’t un-know these horrifying truths, join us in civil resistance before it’s too late. Policy and legislation can’t get us the change we need. They can codify the progress we make – but that will come afterwards. Now is the time to resist and that means all of us. The method will work its magic, but not without you.
Join Just Stop Oil on a slow march at midday every Saturday, at Parliament Square until we win.
Reading list
1. This is an Uprising, Paul Enger & Mark Engler
2. Blueprint for a Revolution, Srdja Popovic
3. The End of Protest: A new blueprint for Revolution, Micah White
4. Don’t think of an Elephant, George Lakoff
5. From Dictatorship to Democracy, Gene Sharp ( PDF Available free online)
6. “The success of nonviolent civil resistance”, Erica Chenoweth (Ted Talk)
7. Rules for Revolutionaries, Zack Exley and Becky Bond
8. Hegemony How-To: A Roadmap for Radicals, Jonathan Smucker
9. How Organisations Develop Activists, Hahrie Han
10. Reinventing Organisations:A Guide to Creating Organizations Inspired by the Next Stage of Human Consciousness, Frederic Laloux
Video & Film:
* Bringing down a dictator (Serbian Uprising by Otpor!)
* The Children March (during the US Civil Rights movements)
* Webinars on Momentum-driven organising: Ayni Institute (Carlos Saavedra)Post navigation
Republished from https://juststopoil.org/2023/06/30/times-up/