Households left to pick up tab for shareholder payouts that plunged private water companies into debt

English and Welsh households are paying £53 each a year to service the debts of private water companies that were accumulated after they doled out ridiculously high dividends to shareholders, a London School of Economics report has revealed.

Payments on £1.2 billion worth of debt have landed directly on the laps of households according to a study by Karol Yearwood of the LSE. The main beneficiaries of the borrowing policy were shareholders, which received payouts far in excess of any available cash surplus.

According to the research, which has been published in the Financial Times, private water companies could have funded all of their operations and investments from customer bills, without taking on any borrowing whatsoever.

But instead they have sunk into the red by the tune of £51 billion, leaving bill payers with interest payments on debt that should never have been acquired.  

The largest water companies in England could have funded all of their capital expenditure since privatisation without taking on a single penny of debt, analysis of the 28 years since they were sold off by Margaret Thatcher’s government has found.

The nine companies, which together with the Welsh group Dwr Cymru supply most of the population of England and Wales, have taken on billions of pounds-worth of borrowing, yet the aggregate cash flow generated suggests their capital spending could all have been funded out of internal resources.

Customer bills in England and Wales have increased by 10 per cent since 2002, from an average of £356 per household in 2002 to £395 in 2018. In Scotland, where services remain in public control, bills have fallen in real terms. 


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