Water investors have withdrawn billions from private companies, analyst claims

Shareholder investment in top 10 water and sewage firms has decreased by £5.5bn since privatisation. while dividend payments have increased to £72.8bn

Shareholders in some of the UK’s largest water companies have withdrawn £85.2bn since privatisation while failing to invest sufficiently in infrastructure, according to analysis from the University of Greenwich.

The analysis claims that, adjusted for inflation, shareholder investment in the top 10 water and sewage firms has decreased by £5.5bn since 1989.

Their retained earnings have dropped by £6.7bn, while dividend payments have increased to £72.8bn.

Industry regulator Ofwat, however, said they “strongly refuted” the figures presented by the University of Greenwich.

“While we agree wholeheartedly with demands for companies to change, the facts are there has been huge investment in the sector of over £200bn,” an Ofwat spokesperson said in a statement.

Water UK, which represents the industry, claimed that current investment levels were double those before privatisation, BBC News reported.

The analysis notes that the “total shareholder equity in all the companies fell, even in cash terms, from £3.767bn in 1990 to £3.397bn in 2023”.

“In real terms, this represents a 62 per cent cut, a reduction of £5.523bn after revaluing the 1990 equity to 2023 prices,” it states.

“Only two companies show any real increase over the period, one of which is Southern Water, due entirely to the £391m injection by Macquarie in 2022.” Macquarie is an Australian asset management firm that began investing in Southern Water in 2021.

Private water companies are facing severe criticism for underinvestment amid numerous leaks and sewage spills.

On Friday, the UK Health Security Agency said 46 cases of infection by cryptosporidium, a parasite that can cause diarrhoea and vomiting, had been confirmed in Brixham after people drank contaminated water.

Water companies are proposing raising household bills by 33 per cent over the next five years to fund infrastructure projects.

David Hall from the University of Greenwich said that water companies are prioritising shareholder returns over infrastructure investment and treating customers as a “cash cow”.

Previously, Mr Hall has said the “debt and the interest we pay on it is simply down to a systematic extraction of shareholder payouts far in excess of any available cash surplus”.

He believes this system “is not sustainable and seriously disadvantages consumers”.

He is calling for a fundamental restructuring of the industry and advocates a return to public sector management to ensure better service and accountability.

Ofwat is currently reviewing spending plans of water companies and proposed bill increases for the period 2025-2030, with draft proposals expected in June.

The outcome of these reviews will determine the extent of future bill increases and investments.