Thames Water has been crippled by huge debts. Photograph: Sam Oaksey/Alamy
Lenders say a ‘full return to legal, regulatory and environmental compliance’ under new rescue plan would not be completed until at least 2035-2040
Thames Water may not fully comply with rules on pollution of England’s waterways for as long as 15 years, according to a new plan by creditors who are scrambling to avoid the utility being forced into government administration.
The creditors who in effect own Thames Water have said they will commit to paying fines for pollution, as well as writing off more of their loans and investing more in the company, in new proposals published on Thursday.
However, the creditors also said that “a full return to legal, regulatory and environmental compliance” under their plan would not be completed until at least the 2035-2040 period, raising the prospect of sewage levels above legal limits in some places for at least a decade. They will argue for further leniency on fines from the regulator, Ofwat, during that period, and that it will be impossible for the company to make upgrades across London and south-east England more quickly because of the scale of the work needed after years of neglect.
The group of financial institutions, under the new London & Valley Water holding company, has been locked in talks with Ofwat since May over acceptable terms for the hugely complex restructuring of Britain’s biggest water company.
Thames Water has been crippled by huge debts built up over two decades by owners who have been criticised for paying out dividends without investing enough in its leaking pipes and malfunctioning treatment works. That contributed to widespread public outrage over the level of sewage in Britain’s rivers and seas.
April 2023 Surfers Against Sewage and Extinction Rebellion protests in St Agnes, Perranporth, Truro and Charlestown which unveiled spoof Blue Plaques to the MPs and Conservative Government who allowed raw sewage to be dumped in the sea (Image: Surfers Against Sewage)
INVESTMENT in Britain’s water utilities took a dive under Thatcher’s government. By 1980 investment by the regional water authorities dropped by two-thirds as the neoliberal straitjacket into which public expenditure was confined limited their ability to raise capital.
Contrast this to the present situation where the now privatised water companies have racked up millions in loans that seem more valued as a source of ready cash to pay bonuses, dividends and sweeteners than infrastructure investment.
The total debt burden of the dozen privately owned water companies stands at £65 billion which this year’s Commons report says is perilously close to the 70 per cent gearing at which commercial credibility is compromised.
Jo Maugham, director of the Good Law Project, which has been involved in legal challenges to a number of water companies, says: “The water sector has been poorly regulated for decades. It has been poorly regulated primarily by allowing water companies to over extract water from aquifers and reservoirs but also cash from operating entities within the water companies, and they’ve been allowed to underinvest in water infrastructure.”
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The logical case for public ownership is sometimes challenged by the suggestion that taking these failing enterprises into public ownership would be prohibitively expensive.
This is, of course, true if these enterprises were to offered for sale at the price their owners value them. A socialist government armed with a popular mandate and backed by a working class armed with both resolve and the necessary instruments of coercion might simply dispossess these rapacious incompetents and instruct them, individually and as a class, to find an alternative way of making a living freed of the responsibilities of ownership.
THAMES WATER will only have to pay a fifth of its record £122.7 million in fines under a “sweetheart deal,” with industry regulator Ofwat branded “outrageous” by water campaigners today.
The heavily indebted utility firm was handed the penalties in May for failures over sewage treatment and paying out dividends.
It has already passed a deadline for paying them by August 20 but has now agreed to pay only a fifth by the end of next month, with the remainder subject to securing a private rescue deal and cash injection.
Ofwat said that it had set a final “backstop date” of March 31 2030 for payment of the remaining penalties whether or not Britain’s biggest water company avoids insolvency.
It would have 30 calendar days to pay up after securing such a deal or at the end of an insolvency process that would see it placed into a government special administration scheme.
River Action chief executive James Wallace said: “It is outrageous that Thames Water has been allowed to kick its fine down the road.
“This fine must be paid by those responsible, not future owners and investors.
“Ordinary people do not get to walk into court and say, ‘I’ll pay the rest of my penalty if I get a better paying job.’ Yet that is exactly the sweetheart deal Thames Water has secured.
“This is not accountability. The investors who drained the company and pocketed £170 million in dividends in October 2023 and March 2024 may never feel the consequences.
April 2023 Surfers Against Sewage and Extinction Rebellion protests in St Agnes, Perranporth, Truro and Charlestown which unveiled spoof Blue Plaques to the MPs and Conservative Government who allowed raw sewage to be dumped in the sea (Image: Surfers Against Sewage)
Nicola Shaw received remuneration from Kelda Holdings as well as Yorkshire Water. Photograph: Graham Turner/The Guardian
Company says extra payments relating to work for Kelda Holdings were covered by shareholders not billpayers
The boss of Yorkshire Water, one of Britain’s biggest water suppliers, has received £1.3m in previously undisclosed extra pay since 2023 via an offshore parent company, the Guardian can reveal.
Nicola Shaw received £660,000 from Yorkshire Water’s Jersey-registered parent company, Kelda Holdings, in the 2023-24 and the 2024-25 financial years. The size of the fees was not disclosed in the annual report of the regulated subsidiary, Yorkshire Water Services.
The utility company at first refused to detail the pay Kelda Holdings had awarded Shaw, saying the parent company was a “private entity registered in Jersey and subject to separate disclosure frameworks”. Only after the Guardian raised questions about the ability of MPs and bill payers to scrutinise the pay awarded did the company reveal the amount of the two payments.
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Gary Carter, the national officer for GMB, a union representing water workers, said: “This is another case of water companies not listening to the outrage and concerns of the public over the payment of unjustifiable salaries.
“The fact that this salary is hidden and not transparent just further undermines the reputation of water companies. This sort of behaviour has got to end.”
April 2023 Surfers Against Sewage and Extinction Rebellion protests in St Agnes, Perranporth, Truro and Charlestown which unveiled spoof Blue Plaques to the MPs and Conservative Government who allowed raw sewage to be dumped in the sea (Image: Surfers Against Sewage)
England’s privatised water industry may one day be considered a textbook case study of failed corporate responsibility, regulation and governance. The Cunliffe review, the recent report into England’s privatised water industry, concluded that the financial regulator, OfWat, needs to be disbanded and a new water regulator will be introduced.
For that to work effectively, better pollution monitoring and more clearly defined pollution incident criteria are essential. While politicians and water companies have claimed to be reducing pollution incidences, they might not strictly be tackling sources of pollution, so communications must be carefully scrutinised for disinformation.
The UK’s environment minister Steve Reed MP has described the water industry as “broken”. The public have rising water bills. Water companies owe over £60 billion in debts and have left the country with uncertain water security in the face of climate change.
The Environment Agency (EA) in England recently announced that serious pollution incidents in 2024 rose by 60% to 75 from 47 in the previous year. The EA classifies pollution incidents using a four-point scale called the common incident classification scheme. Trained EA officers consider the evidence reported via their incident hotline to assess its credibility and severity.
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Category 1 is for major incidents, 2 for significant, 3 for minor incidents and 4 for no impact. Category 1 and 2 typically involve visible signs of dead fish floating. For salmon, if more than 10 adult or 100 young fish are dead, this is category 1. With fewer than ten adult and 100 young fish dead, it’s category 2.
No dead fish, no serious problem? The EA can also record damage on protected habitats as “pollution incidents” but these are harder to substantiate without investigative research that takes time and money.
Last year, more than 450,000 sewage discharges were recorded by event duration monitors. These are devices fitted to the end of overflow pipes that indicate when and for how long they have been discharging.
These discharges represent 3.6 million hours of untreated sewage going into our rivers and coasts. These contain chemical contaminants including pharmaceuticals, detergents and human pathogens. Only 75 incidents were recorded as serious or significant in 2024. Another 2,726 were classed as minor.
So lots of sewage discharges are not being classified as pollution incidents, despite containing pollutants. The EA advises its investigating officers to “record substantiated incidents that result in no environmental impact, or where the impact cannot be confirmed, as a category 4”.
The EA has been criticised for turning up late to 74% of category 1 and 2 pollution incidents and for being pressured to ignore low-level pollution – all claims that they have denied. However, they admit they are constrained by finances. Any new regulator must be adequately resourced and independent.
Pollution isn’t always classified as an official pollution incident. YueStock/Shutterstock
In their recent report into pollution incidences, the EA states that they respond to all category 1 and 2 (serious and significant) water industry incidents and will be increasing their attendance at category 3 (minor) incidents. They highlight that more inspections will identify more issues. This shows some acceptance that the more incidents they attend, the more would be substantiated or recorded appropriately.
Most sewage discharges would not have been reported to, or recorded by, the EA as pollution incidents because they were permitted discharges from combined stormwater overflows. Water companies are allowed to discharge untreated wastewater under exceptional rainfall or snowfall conditions to prevent sewage backing up through the pipes.
Extra water flow in rivers from rainfall is meant to dilute chemical contaminants in wastewater. However, some discharges can last days or weeks. The EA is currently investigating whether water companies have been breaching their permits and discharging untreated wastewater when there is low or even no rainfall.
What counts as pollution?
The UN classifies pollution as “presence of substances and energy (for example, light and heat) in environmental media (air, water, land) whose nature, location, or quantity produces undesirable environmental effects”. This definition differs markedly from the EA’s working definition of pollution incidents.
Many sewage discharges containing low concentrations of pollutants won’t kill fish but might still be harmful to fish larvae or small insects, for example.
However, the broad picture from EA data is that invertebrate communities at least are in a better state than they were three decades ago before wastewater treatment plants were upgraded following the EU’s Urban Wastewater Directive.
Some pollutants bioaccumulate through the food chain, so they become concentrated in top predators such as orcas. Some chemicals mimic reproductive hormones even in low concentrations and can feminise fish, for example. High levels of nutrients from agriculture and sewage in rivers can cause fungal diseases in seagrass meadows.
Other families of chemicals build up in wildlife and people, such as persistent “forever chemicals”, much of which comes from wastewater discharges. Continued discharges of antibiotics into waterways might not be classified as pollution incidents but still pose a substantial risk to human and ecosystem health through bacteria developing antibiotic resistance.
The government has just committed to cut sewage pollution by 50% by December 2029 based on 2024 data. But it’s not yet clear whether these involve cutting the frequency of discharges, the duration or both.
This data could also be manipulated so that a large number of small discharges can be consolidated into one official discharge event. Currently, the volume of discharges from stormwater overflows isn’t known. Without this vital data we can’t ascertain the risk posed by their contaminants.
A tanker from Thames Water
