Thames Water, the UK’s largest such firm, is fighting for its survival after years of poor performance, fines and hefty dividend payouts Photograph: Gill Allen/REX/Shutterstock
Guardian Exclusive: UK’s biggest water company assessed risks before cutting back on cost of environmental work, investigation shows
Thames Water intentionally diverted millions of pounds pledged for environmental clean-ups towards other costs including bonuses and dividends, the Guardian can reveal.
The company, which serves more than 16 million customers, cut the funds after senior managers assessed the potential risks of such a move.
Discussions – held in secret – considered the risk of a public and regulatory backlash if it emerged that cash set aside for work such as cutting river pollution had been spent elsewhere.
This could be seen as abreach of the company’s licence commitments and leave it vulnerable to accusations it had broken the law, according to sources and material seen by the Guardian.
Thames Water continued to pay staff bonuses worth hundreds of thousands of pounds, and also paid tens of millions in dividends as recently as March this year, while cutting back on its spending promises. The company did so despite public claims from its leaders that improvements to its environmental performance, including on pollution, were a priority.
Wildlife presenter Liz Bonnin and naturalist and TV presenter Chris Packham join thousands of environmental campaigners from more than 130 organisations in a March for Clean Water on 3 November 2024 in London. Photograph: Mark Kerrison/In Pictures/Getty Images
A tanker pumping out excess sewage from the Lightlands Lane sewage pumping station in Cookham, Berskhire which flooded after heavy rainfall, January 10, 2024
WATER COMPANY fat cats are being rewarded for decades of criminal behaviour, a Labour MP said today after the industry regulator announced an average £86 bill hike from April.
Clive Lewis said billpayers are paying for crooks as he called for water firms to be nationalised and Ofwat abolished.
The MP for Norwich South said: “Ofwat is making us pay for decades of criminal behaviour by water companies.
“The regulator turned a blind eye to years of these companies’ widespread illegal sewage dumping.
“Privatisation is a failed experiment. We deserve a public ownership model prioritising people and the environment over profit.”
Ofwat said that the steep rise is part of bill increases in England and Wales over the next five years that will pay for supply upgrades and to reduce sewage discharges.
This is despite water companies doubling their profits since 2019.
Adrian Ramsay MP, Green Party Co-leader. Wikipedia CC.
Reacting to news that government and regulators have broken the law by being too lenient on water companies that spill sewage, and on the day Thames Water seeks a £3bn bailout, Green Party co-leader Adrian Ramsay MP said:
“For too long billions have been leaking out to shareholders instead of going into fixing our broken water system. But it will be water customers who are expected to bail out this failed model of privatisation through steep hikes to water bills.
“The way to end this fiasco and ensure government and regulators keep within the law is to put failing water companies into special administration and ultimately to bring water back into public ownership.”
Demands for renationalization of water services in England grows as private London water supplier requests bailout
Social justice organizations in Britain are urging judges to reject a bailout request from Thames Water, one of the country’s largest water providers, serving some 16 million people in the greater London area. Campaigners argue that approving the bailout of the private utility provider would allow Thames Water to continue its mismanagement while forcing consumers to shoulder the burden—raising annual water bills by £250 (USD 317) per user.
“This is daylight robbery. There are two people who can stop it, the judge in court today and Steve Reed, the environment secretary. He can protect billpayers from this by withdrawing Thames Water’s license, on the basis of financial insolvency, illegal sewage dumping, or both,” Cat Hobbs, Director of We Own It, told Peoples Dispatch. “Tony Blair’s government defended the public interest when Railtrack went bust, why won’t this government do the same for Thames Water?”
The company warned that without the bailout, it would run out of funds by March next year. However, Thames Water customers predict that they will be unfairly burdened with the costs of the bailout, including the high interest rates that will follow, while company management will face little accountability. The We Own It campaign noted that “it is obvious that the consumer as the sole source of revenue will indirectly fund this amount by way of increases in their water bills.”
While claiming financial difficulties, Thames Water has managed to secure substantial profit margins for its investors—many of whom are based outside Britain and remain unaffected by the declining quality of local water services—while awarding generous bonuses to its management. This pattern is not unique to Thames Water: all water and sewage companies across England have followed a similar path since privatization under Margaret Thatcher’s administration. During this time, these companies have paid out £72 billion (91 billion USD) to shareholders while accumulating £60 billion (76 billion USD) in debt. The result has been a chronic lack of investment in infrastructure, leading to leaks of both water and money.
“The argument for privatization was that there would be more investment, the water would be cheaper, and the service would be more efficient,” independent MP Jeremy Corbyn remarked during a discussion on water services earlier this year. “It’s really worked out well on that, hasn’t it?”
A risk to ecosystem and human health
In addition to financial losses, privatization has led to a significant decline in water safety and quality. Private operators have regularly discharged untreated sewage into rivers and the sea, causing harm to ecosystems and posing a direct threat to human health. Regulators, meanwhile, are unable to enforce compliance with safety standards due to conflicts of interest, low fine thresholds and the fact that the infrastructure itself remains under the companies’ ownership.
Unlike other European countries that experimented with water privatization by outsourcing service provision but mostly retaining ownership of infrastructure, England sold everything. As a result, rather than waiting for contracts to expire and reclaiming control, the government would need to buy back the entire water system from companies like Thames Water. According to We Own It, the initial cost for this process could start around £15 billion (19 billion USD)—an amount the campaign estimates could be repaid within just six years.
Re-nationalizing water services has led to significant successes in other countries, according to Matthew Topham, Lead Campaigner at We Own It. “Paris took back control of its drinking water in 2010 from an outsourced private contract. Bills were immediately lowered, customer satisfaction levels are high, and last year, they were able to reinvest 89 million euros in improving the network,” he explains. He adds that public ownership has also sparked community participation, with cities like Lima, Terrassa, and Paris establishing observatories to give communities, workers, and activists a voice in managing water services.
Campaigners against the Thames Water bailout are calling precisely for a return to public ownership. They argue that this approach would not only lower costs for users but also create space for more investment in infrastructure, improving water quality. This demand resonates with over 80% of the British public, who support the idea of water services being brought back into public hands.
The Labour government, however, does not share this vision. Under Jeremy Corbyn’s leadership, the party’s program included an ambitious plan to renationalize water services. By 2024, Labour’s election program had moved away from this idea, keeping only the possibility of granting “new powers” to regulators to block bonuses for companies proven to pollute watercourses. As many on the left predicted ahead of the July 2024 election, Keir Starmer’s administration has shown a clear inclination toward privatization, not only in water services but also in healthcare and other sectors.
The final decision on Thames Water’s bailout request is expected in early 2025, with campaigners urging the court to consider users’ concerns and reject the proposal, paving the way for better water services.
People take part in the Clean Water march in central London, to demand tougher action on keeping the UK’s rivers and seas clean, November 3, 2024
THE River Action campaign has hired a top litigator as it intensifies efforts to hold polluters account and restore Britain’s waterways.
Emma Dearnaley, previously legal director at the Good Law Project, will join the group as its new head of legal in January.
She fought several cases in her former job, including a successful challenge against the Department for Environment Food and Rural Affairs that led to the government expanding the scope of its Storm Overflows Discharge Reduction Plan to include coastal waters.
River Action chief executive James Wallace said: “This is a shot across the bow for polluters and the government alike.
“The law is one of our strongest tools, not only to compel polluters to repair and update their infrastructure but also to compel the government to adequately fund environmental regulators.
“After 14 years of budget cuts, it’s time for the Environment Agency to have the resources to enforce the law against agricultural, sewage and chemical polluters and for Ofwat to stop water companies polluting for profit.”
