Thames Water’s greed is hardly new
Back in the 1980s, when I was briefly water industry correspondent of the Financial Times, the one highlight of my two assigned specialisms (the other was forklift trucks) was a series of lunches in the Oak Room of the Thames Water Authority’s historic New River Head building, where the magnificent wood panelling was attributed to the 17th century master, Grinling Gibbons.
I was not, of course, the only journalist invited. Also present were colleagues from The Times, Telegraph and Guardian. But it always seemed to me that I – not as any sort of expert on matters aquatic, but as the FT’s man – was especially fawned upon.
Our host, Roy Watts, as the authority’s chairman, was hell-bent on privatisation and gave the impression that the Pink Paper’s imprimatur was an important step along the way. Roy – always jolly and good company – would lean across the table, which was laden with good food and wine, to make sure that I understood the many benefits that would accrue from the transfer of responsibility for the provision of water and sewerage from the public to the private sector.
The trouble was, I never really did. I understood entirely that water utilities, rather like the old British Railways, were not exactly top-notch and that it was important something be done to update their creaking, and leaking, infrastructure dating mostly from the Age of Steam. What I failed to comprehend was how private investors and (I assumed) highly-remunerated directors would improve the situation. Wouldn’t introducing the profit motive into the running of a utility whose customers were essentially hostages simply use up resources that might better be used to dig holes and install new pipes.
Roy chortled at the extent of my ignorance. Au contraire, he assured me: privatisation would transform the industry, injecting new life and much-needed cash into a sector that had been moribund since the 1930s. Specifically, the proposed new London Ring Main, a 50-mile-long network of concrete tunnels, would revolutionise the delivery of fresh water to the capital, reducing pressure on existing mains while, along the way, enabling the repair and replacement of Victorian infrastructure. The result? A watertight system for the city’s eight million customers who – and it was crucial that I should understand this – were not only his key focus, but that of his financial backers.
A quarter of a century on, Thames Water, privatised in 1989, is one of the most despised utilities in the UK. Like all of its fellow water companies, it is dumping raw sewage into rivers at record rates. In parallel, leaks from Victorian and Edwardian mains, never renewed, continue to pose fundamental problems. The industry as a whole is a disaster, notable for the extent of its failure to live up to the boasts that led to its being taken out of public ownership.
The current boss of Thames Water, Sarah Bentley, was paid a total of £2 million, including bonuses, in 2021. Elsewhere, Liv Garfield, the CEO of Severn Trent, took home a whopping £3.9 million, while Steve Mogford, the head of United Utilities, serving the northwest of England, “benefited” from a package valued at £3.2 million. It is the same everywhere. The privatised utilities are polluting the nation’s rivers and coastlines at an ever-increasing rate. Hard-hitting analysis by the Environment Agency may or may not lead to change, but if it does it will not be because those at the helm have suddenly discovered a sense of social responsibility.
Bentley, like a number of her most senior industry colleagues, has announced that she will forego a massive bonus that would otherwise have been paid to her this year. “I am proud of the work my team is doing in starting to address the poor state of our asset base and unacceptable standards of service for our customers,” she said. “Nevertheless, the turnaround plan is not yet where I want it to be, primarily due to significant headwinds from extraordinary energy costs, coupled with two severe weather events. These have hit our customers and environmental performance. Against this backdrop it simply doesn’t feel right to take my bonus this year.”
Well, quite. So what is to be done? Not much is the answer. The sector as a whole has promised to spend an additional £10 billion over the next seven years to do the very things they undertook to do when winning their franchises 30 years ago. Unsurprisingly, the increase is to be funded not out of profits but by way of increases in customers’ bills.
No way to run a railroad seems like the only honest response.
If it matters (and I would argue that it does), Thames Water, having been privatised in 1989, was sold, first, to RWE, a German utilities group, then to Macquarie, an Australian conglomerate part-owned by investors from China and the United Arab Emirates, most recently to investors led by the Canadian pension fund, Omers. Like almost all privatised public utilities in the UK, it is British in name only. As for Roy Watts, previously a big noise in the aviation sector, he was knighted for services that do not immediately spring to mind and made a freeman of the City of London. But it did not end well for him. On April 27, 1993, aged 67, he threw himself into his own water and was found floating in the Thames near Westminster Bridge. His motto, often repeated, was “Put the Customer First”.
Tim Marshall is away.
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