Prem Sika, Emeritus Professor of Accounting at the University of Essex and the University of Sheffield and a Labour member of the House of Lords, states on the website Left Foot Forward: “We are currently witnessing the re-privatisation of water.” And he asks: “If despite predatory practices and huge extraction of returns, private companies are guaranteed to be rescued by the state, why should directors act responsibly?”
The 1989 privatisation of England’s water industry is “an organised rip-off” and an unmitigated disaster. Water Companies have neglected investment in infrastructure and dumped tons of raw sewage in rivers, lakes and seas. As monopoly suppliers they have levied inflation-busting charges on customers; paid over £85bn in dividends and borrowed over £65bn to finance them. Over 28% of sales revenues vanish in servicing debts. Major companies have gearing ratios ranging from 500% to over 1,000%, and are struggling make debt repayments. Water regulator Ofwat and the Environment Agency have done little to curb predatory practices.
A crisis point has been reached. Water shareholders are writing off investment, debt is rated as junk, and Thames Water, England’s largest water company, is actively seeking to restructure its debts. Privatisation can only be ended by the state, but governments in bed with corporate interests are delaying the inevitable. Prem Sika concludes:
Private ownership of monopolies can’t resolve the crisis which is due to profiteering, excessive dividends, exploitation of customers and lack of investment in infrastructure. The new owners would enjoy a state guaranteed monopoly and want a return on investment. Thus, a continuing crisis and conflict with the general public is inevitable.
