[Image: Matt Cardy/Getty Images]

By Stefan M. Kløvning

UK Economics – Feeling injustice to reign over the monopoly plaguing the water industry in the British Isles these days, Environment Secretary Michael Gove now warns water companies that calls for renationalisation will increase unless they clean up their act. “They have,” says Mr. Gove, “shielded themselves from scrutiny, hidden behind complex financial structures, avoided paying taxes, have rewarded the already well-off, kept charges higher than they needed to be and allowed leaks, pollution and other failures to persist for far too long.” 


Secretary Gove asserted in a talk for Water UK City Conference on Thursday that he opposes bringing the industry back under state ownership, having been privatized since 1989 – as one of Thatcher’s many privatization achievements – but that public opinion would likely turn increasingly in favour of doing so unless the companies change their behaviour. He thinks the continuity of the procrastination of the water industries is of disadvantage to the British consumer, but would be to the advantage of Jeremy Corbyn and the Labour party’s support of renationalising parts of the private sector.  


The secretary spoke particularly against the chief executives of United Utilities, Severn Trent and Anglian Water, who all received seven-digit salaries and earned a total of £18.1 billion between 2007 and 2016 but had paid no corporate tax during this decade. He also brought attention to the environmental damages caused by the “prevarication and procrastination, ducking and diving and dragging of feet” of the water companies, exclaiming that it is unacceptable that three billion litres of water is leaked every day. He proposed a greater percentage of their profits to be invested into building the required infrastructure for preventing this from occurring. The leaks have reduced about a third from the ’90s but have not changed much the last 15 years.  


Severn Trent’s chief executive Liv Gardfield argues against nationalisation, pointing to the industry’s investment of £150 billion and its customer service since privatization 25 years ago. She thinks this investment would not have been possible under State control of the industry.  


There are luckily still companies willing to act on the issue, however. Ofwat, the economic regulator of the water sector in England and Wales, has set its target to reduce leaks by at least 15%, but Yorkshire Water hopes to reduce as much as 40% by 2025. Yorkshire Water experiences around 5,500 leaks a year, and it costs an average of £19,000 for them per day to investigate and repair the damages.


The chief executive of Water UK, Michael Roberts, said the industry had a “legitimate challenge” and had to act in the best interest of the public. He added that it is no longer a viable option to abstain from acting on the issue.  


The regulation boss at Yorkshire Waters, Liz Barber, explains that

What this has done is really bring back into focus the competitive regulation that has been missing in recent years. Customers will be able to compare their bill and their water company performance in a much clearer, more comparable way. I think that’s a good thing for customer service, and it will push us to be more ambitious and more innovative. We’ll be incentivised to do very well. This is a great opportunity for us, as a sector, to wake up.