Out-of-control water industry enjoys high profit margins and spiralling prices

As households struggle with austerity, new report finds out-of-control water industry enjoying high profit margins and spiralling prices.

A report from the New Policy Institute finds that water bills have been outstripping earnings since long before the recession. Over the last ten years, bills have risen more than twice as fast as earnings. Since privatisation in 1989 bills have risen threefold while ordinary inflation has doubled. Rising energy bills provoke popular anger but water usually goes unnoticed.
Key findings of the report include:
  • Immediately after privatisation, most water companies were listed on the stock exchange. Now there are only four such companies with most of the others being in the hands of, often foreign owned, private equity consortia.
  • 30% of an average household bill – more than £100 a year – goes on profit. This compares with 9% in the energy sector.
  • In the last ten years water bills have risen by 64% compared with 28% for average earnings. If the average bill had done no more than keep up with earnings, it would now be £71 a year lower.
  • There is no competition in the water industry. If prices rise, it’s on the say so of the industry regulator. There is nothing inevitable about rising water bills: back in 1999 the regulator decided that bills should fall, by 10%.
  • Despite high profit margins and rising prices, one water company (Thames) has had to turn to government for support in order to finance new investment.
Dr Peter Kenway, director of the New Policy Institute and report co-author, said:
“The combination of opaque ownership, steadily rising prices and growing financial weakness is not acceptable in an industry like water that is obviously too important to fail. Our report shows that the industry in England has big questions to answer about the deal it is offering consumers and taxpayers. It is time the government starting asking them”.
A spokesperson for Unison which commissioned the report, added:
“This private monopoly is the worst of all worlds. Lots of rich people have been keen to grab a slice of the water industry pie. But households, taxpayers and employees have all lost out. The time has come to think again, with all options on the table. England is out of step, even within Britain where water in Scotland is publicly owned while water in Wales is not-for-profit".