1. The problems with private ownership of water in England Labour South East Regional Economic Conference, Southampton, 3rd March 2018
Kate Bayliss
Research Associate, SOAS, University of London, University of Leeds
David Hall
Visiting Professor, Public Services International Research Unit (PSIRU)
University of Greenwich
Bayliss & Hall, Southampton, March 2018

2. Bayliss & Hall, Southampton, March 2018
Summary
What does the sector look like?
Who are the investors?
What are the problems?
Wider context.
This presentation is based the following research papers:
‘Bringing water into public ownership: costs and benefits’ K. Bayliss and D. Hall May 2017
UK Case study for European Union-funded research project FESSUD.EU
Bayliss & Hall, Southampton, March 2018

3. Bayliss & Hall, Southampton, March 2018
WASCs in UK
Public water utilities in Scotland and Northern Ireland
10 integrated water and sewerage companies in England and Wales privatised in Current structure:
Listed on London Stock Exchange: Severn Trent, United Utilities, South West Water
Not-for-profit: Welsh Water
International conglomerate: Wessex, Northumbrian
Financed-owned SPVs: Anglian, Thames, Yorkshire and Southern Water.
Bayliss & Hall, Southampton, March 2018

4. Bayliss & Hall, Southampton, March 2018
What are the problems?
Dense corporate structures – lack of accountability and transparency, off-shore ownership for de-listed companies
Debt-financed investment
High debts at the same time as high dividends
Meanwhile affordability is declining
Bayliss & Hall, Southampton, March 2018

5. Corporate structures: Where does the money go?
Bayliss & Hall, Southampton, March 2018

6. Bayliss & Hall, Southampton, March 2018

7. Debt and equity in the water sector 1990-2015
Source: NAO 2015
Bayliss & Hall, Southampton, March 2018

8. Highest paid director (£m)
WASCs data 2015/16
Company
Highest paid director (£m)
Gearing (%)
Thames Water
0.96 80
Anglian Water
1.20 79
Yorkshire Water 77
Southern Water
0.70 78
Northumbrian Water
0.71 67
United Utilities Group Plc
2.80 63
Wessex Water
0.60 62
South West Water
0.76
Severn Trent Water
2.40 61
Welsh Water
0.77 60
Total / average
1.21 70
Source: Company reports 2015/16, Ofwat website
Bayliss & Hall, Southampton, March 2018

9. Bayliss & Hall, Southampton, March 2018
English water and sewerage companies post-tax profits and dividends £m
Source: Authors’ calculations based on company reports
Bayliss & Hall, Southampton, March 2018

10. Allocation of revenue from customer bills (%) (2010-2015)
Operating Costs
38.6
Infrastructure renewals
8.5
Current cost depreciation
23.1
Return on capital
26.8
Tax
3.0
Bayliss & Hall, Southampton, March 2018

11. Declining affordability in England
Bayliss & Hall, Southampton, March 2018

12. One third of households struggles to pay for water
Source: Ofwat Report “Affordability and debt ”
Bayliss & Hall, Southampton, March 2018

13. Bayliss & Hall, Southampton, March 2018

14. Financial Times City Editor Sept 2017
On privatised water: “…. Quite why this natural monopoly should not operate through not-for-profit, public interest companies is ever less clear.” Water privatisation looks little more than an organised rip-off FT Sep by Jonathan Ford , City Editor
On public ownership: “For the first time in four decades, an intellectual revolution is taking place in British politics. …it is the right that risks being left behind. Radical ideas from the hard left … now have mainstream appeal.” Tories are being swept away by Labour’s intellectual revolution FT Sep Sebastian Payne

15. Bayliss & Hall, Southampton, March 2018
The UK in context
The English system is unique in the world.
Despite much study and publicity, no other country has adopted this model in the last 28 years.
Even where water is privatised, this typically takes the form of a fixed term concession rather than complete transfer of ownership
The great majority (90%+) provide water and sewerage services though municipalities or regional authorities (as in the UK before privatisation in 1989).
Even in the USA, 85% of water is public, carried out by municipalities.
Strong trend in Europe and elsewhere in the last decade to re-municipalise private water services
including the cities of Paris and Berlin
Private water unpopular everywhere e.g. Italian referendum
Also consistently unpopular in UK from 1980s onwards
Putting water in public hands would put us in step with the rest of the world.
Bayliss & Hall, Southampton, March 2018

16. Remunicipalisation of water services 2000-2015
Source: Our public water future ed. Kishimoto et al
Bayliss & Hall, Southampton, March 2018