The largest water supplier in England is threatened with bankruptcy due to a debt of around 14 billion pounds. Now the state may have to step in and take over “Thames Water” at least temporarily.
Thames Water supplies water to 15 million consumers in London and other parts of south-east England – and it’s on the brink of bankruptcy. The reason for this is a debt of around 14 billion pounds. The water utility is owned by an investor group made up of private equity companies and pension funds. The largest shareholder with almost 32 percent is a Canadian pension fund from Ontario.
The CEO of Thames Water resigned on Tuesday evening with immediate effect. That came unexpectedly and was a bang. Since then, the consequences of the privatization of water management have been discussed once again.
In 1989, the industry was privatized under then Prime Minister Margaret Thatcher. However, the stock corporations started out debt-free. Today, “Thames Water” is sitting on a huge mountain of debt and is struggling with rising interest rates and high inflation.
Privatization led to high prices
“What happened is absolutely scandalous. Huge dividends have been paid, huge amounts of debt have been incurred, customer bills have risen sharply and raw sewage is being discharged into the rivers,” said Labor MP Ed Miliband, who is a member of opposition leader Keir Starmer’s shadow cabinet. Now the government must explain how it intends to fix this.
The discharge of untreated sewage into lakes, rivers and the sea has been the cause of protests on the island for years. And as for consumer bills, a 2015 study by the National Audit Office concluded that Britain has had to pay significantly more for water and sanitation since the water industry was privatized in 1989. Accordingly, the increase up to 2015, adjusted for inflation, was 40 percent.
Demand for stricter regulation
Miliband is not alone in his anger. Paying out dividends was more important to “Thames Water” than investing in the pipeline system, critics say. The owners and managers got everything they could out of the company and accumulated debt at the same time.
“Once again we find ourselves in a situation where we are being told that customers, taxpayers, should foot the bill for corporate misconduct,” said Darren Jones, leader of the House of Commons Economic Affairs Committee – and probably also for the bad regulation.”
Now the state may have to step in and take over the water supplier at least temporarily. Jones vehemently advocates stricter regulation in order to prevent developments like the “Thames Water” case in the future.