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- author, Dearbyle Jordan
- the role Business reporter for BBC News
Shareholders in some of Britain’s biggest water companies have pocketed tens of billions of pounds but failed to invest, new research has claimed, with the firms planning to increase household bills to fund future spending.
Investors have pulled £85.2bn from 10 water and sewerage companies in England and Wales since the industry was privatized more than 30 years ago, an analysis by the University of Greenwich has revealed.
Companies are under pressure after sewage spills and water leaks, which critics blame on a lack of investment in the country’s infrastructure.
Ofwat, the industry regulator, said it “strongly disputes” the figures.
The spokesman added: “While we fully agree with the demands on companies for change, the facts show that there has been huge investment in the sector of over £200 billion.”
Water UK, which represents the industry, said investment in the sector was “double the annual level seen before privatisation”.
Water and sewerage companies want to increase customer bills by an average of 33% over the next five years to fund improved services for households.
But David Hall, a visiting professor at the University of Greenwich’s Public Service International Research Unit, says water companies have invested “little of their own money” and “treat their customers like cash cows”.
The University of Greenwich examined the reporting of 10 leading water and sewerage 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 biggest firms fell by £5.5bn, adjusted for inflation.
Over the same period, the amount of “retained earnings” – the profit left over after paying things like dividends that can be used for business investment – fell by £6.7bn in real terms.
Meanwhile, the total amount these firms paid out to their shareholders in dividends rose to an inflation-adjusted £72.8bn.
Ofwat said the dividend figure was “simply wrong”.
It said it “does not represent the true total, given that it is adjusted for inflation. Ofwat suggests a figure since privatization of £52bn”.
Combined, falls in shareholder investment and retained earnings – or profits – and increases in dividend payments mean owners have pocketed £85.2bn, according to the University of Greenwich.
Water and sewerage companies are looking to spend around £100 billion over the next five years.
They say they need more money to improve infrastructure to limit leaks.
But Mr Hall said: “You raise prices because you can and you get more money from customers and then you pass that on to shareholders because the business you’re in is making a good profit for your shareholders.
“That’s why companies do what they do, and we shouldn’t expect anything different.”
A spokesman for Water UK said: “The investment needs to be funded through dividends.
“Water companies are now looking to increase the pace of investment with a record plan over the next five years to secure our water supply for the future and significantly reduce the amount of waste water entering rivers and seas.
“We now need Ofwat to give us the green light to go ahead with it.”
According to the Environment Agency, there were 464,056 sewage spills in 2023, a 54% increase on the previous year.
Wastewater is defined as anything that goes down a domestic drain. This includes toileting, personal washing or household cleaning, such as in the washing machine or washing the dishes.
This also includes road runoff. The warmer winter and wet weather have left many roadside barbecues packed.
The next few weeks are key in determining how much water companies can raise customer bills.
Ofwat will meet in the coming days to scrutinize water companies’ spending plans and proposed price rises that will affect bills between 2025 and 2030. Ofwat’s draft proposals are due to be published on 12 June.
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 an important service for us,” he said.
“What we need to do is change that system and move to the way the rest of the world is doing it through government agencies and bring it back to the public sector.”
An Ofwat spokesman said: “We share the concerns of the general public and campaigners about the performance of water companies, which is simply not good enough.
“We have prosecuted companies and imposed fines of over £300m in recent years. We want to see changes in the way companies operate and will outline our plans for doing so in mid-June.”