Research by the think–tank Common Wealth has found that water companies’ operating profit margins are significantly higher than other FTSE 350 companies, including Shell and Sainsbury’s.
Water companies have come under fire for the amount of raw sewage pouring into rivers, lakes and seas. Critics say firms have prioritised making large profits for their investors at the expense of properly maintaining their infrastructure.
Thousands of environmental campaigners have participated marches (Photo: Mark Kerrison/In Pictures via Getty Images)A spokesperson for Water UK, which represents the industry, said companies have invested £236bn in their infrastructure over the same period.
In April the average water bill in England and Wales increased by £10 per month to pay for the works required to reduce the amount of sewage being spilled into rivers, lakes and seas. Further bill increases are expected over the next four years.
Water companies have accumulated huge amounts of debt since privatisation, in part to maintain payments to shareholders. The UK’s largest water company, Thames Water, has been at close risk of bankruptcy as it struggles to pay off its debts.
The analysis also looked at the operating profit margin of water companies, which is the amount of money left over after a company covers its day-to-day spending, including staff wages, maintenance and repairs.
The profit margins ranged from 5.1 per cent (Dwr Cymru) to 31.9 per cent (Wessex Water).
A large operating profit could be a sign that a company is spending less money on maintenance and more on paying off debts or rewarding shareholders.
“They’re in a monopoly industry. So water companies put their bills up to the maximum allowed by the regulator. The regulator has been incredibly relaxed about allowing a great deal of dividends.”
The i Paper has been calling for major reform of the industry as part of its Save Britain’s Rivers campaign, a campaign that has recently been shortlisted for the National Ecotricity Impact Award for Environmental Journalism.
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In response to public outrage over the sewage scandal water companies have unveiled plans to invest a record £104bn in their infrastructure over the next five years.
The Government has ruled out nationalising water companies, arguing that such a move will cost £100bn as taxpayers would need to compensate existing shareholders and investors.
However, some experts, including McGaughey, argue that the law allows ministers to temporarily nationalise water companies without compensating shareholders, meaning the move could cost close to zero.
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