image source, Getty Images
- Author, Dearbail Jordan
- Role, Business Reporter, BBC News
Shareholders in some of Britain’s biggest water companies have withdrawn tens of billions of pounds but not invested, a new study says. Companies plan to increase household bills to finance future expenses.
Investors have withdrawn £85.2 billion from 10 water and wastewater companies in England and Wales since the industry was privatized more than 30 years ago, according to analysis by the University of Greenwich.
Businesses are under pressure after sewage and water spills, which critics blame on a lack of investment in the country’s infrastructure.
Ofwat, the industry regulator, said it had “vigorously refuted” the figures.
A spokesman added: “While we fully agree with calls for corporate change, the fact is that there has been huge investment in this sector, in excess of £200 billion.”
Water UK, which represents the industry, said investment in the sector was “double what it was before privatisation”.
Water and wastewater companies want to increase their customers’ bills by an average of 33% over the next five years to fund improvements in services to households.
But David Hall, visiting professor at the Public Services International Research Unit at the University of Greenwich, claims that water companies have invested “less than nothing of their own money” and are treating “their customers like a cash cow.”
The University of Greenwich examined the corporate accounts of the ten largest water and wastewater companies in England and Wales, including Thames Water, United Utilities and Severn Trent.
It says that between privatization in 1989 and 2023, the money invested by shareholders in the largest companies fell by £5.5 billion, adjusted for inflation.
Over the same period, the level of “retained earnings” – profits that are left over after things like dividends have been paid out and can be used to invest in a company – fell by £6.7 billion in real terms.
Meanwhile, taking inflation into account, the total amount these companies paid out in dividends to their shareholders rose to £72.8 billion.
Ofwat said the dividend figure was “just wrong”.
It states that this “does not represent the actual total as it is an inflation-adjusted sum. Ofwat puts the figure at £52bn since privatisation.”
Taken together, declines in shareholder investment and retained earnings – or profits – as well as rising dividend payments mean owners have withdrawn £85.2bn, according to data from the University of Greenwich.
Water and wastewater companies plan to spend around £100 billion over the next five years.
They argue that they need more money to improve their infrastructure to limit leaks.
But Mr Hall said: “You raise prices because you can and get more money from customers, and then you pass it on to shareholders because the business you’re in gives your shareholders a good return.” “
“That’s why companies do what they do and we shouldn’t expect anything different.”
A spokesman for Water UK said: “Investments require funding through dividends.”
“Water companies now want to increase the pace of investment with a record plan for the next five years to ensure the security of our water supply in the future and to significantly reduce the amount of wastewater entering rivers and seas.”
“We now need Ofwat to give us the green light to move forward.”
According to the Environment Agency, there were 464,056 sewage spills in 2023, a 54% increase from the previous year.
Wastewater is anything that ends up in a household drain. This includes going to the toilet, personal washing or cleaning around the house, for example in the washing machine or doing the dishes.
This also includes runoff from streets. A warmer winter and wet weather has left many street grills overloaded.
The next few weeks will be crucial in determining how much water utilities can increase their customers’ bills.
Ofwat will meet in the coming days to review water companies’ spending plans and proposed price increases that would impact bills between 2025 and 2030. Ofwat’s draft proposals are due to be published on June 12.
Water companies can appeal if they disagree with Ofwat’s recommendations.
But Mr Hall said there needed to be a fundamental change in the way the water industry was run. “This is a service that is important to us,” he said.
“What we need to do is reverse this system and move to the way the rest of the world does it, which is through public authorities, and bring it back into the public sector.”
An Ofwat spokesman said: “We share the public and campaigners’ concerns about the performance of water companies, which is simply not good enough.”
“We have held companies to account and imposed fines of over £300 million in recent years. We want to see a change in companies’ performance and will set out our plans to make this happen in mid-June.”