Thames Water sits at the center of decades of struggles over the size of the British state. The water industry was privatized in the late 1980s under then-Prime Minister Margaret Thatcher, who remains idolized by the Tory right-wing for her efforts to shrink the public sector.  

Yet taking utilities out of state hands remains controversial, especially now that people can see the leaking pipes and sewage flows themselves. Complaints have been fanned by dividends paid by service providers alongside reports that underinvestment is contributing to problems.

Voters are “fed up to the back teeth with this company that not only pumps sewage into our precious River Thames, but also we’ve seen sewage flooding our streets in recent times of heavy rainfall,” Munira Wilson, the Liberal Democrat MP for Twickenham in southwest London, told Parliament. “This is indicative of underinvestment by the company in fixing leaks, and being stripped to the bare bones while lining the pockets of executives.”. 

Eoin Treacy's view

Too often government action swings between outright control and laissez faire deregulation. The Conservatives privatized vast swathes of the economy in the belief government control breeds ineptitude and corruption. The counter argument is public utilities are too important to be left solely in the hands of investors. In between there is seldom room for discussion about what good governance should entail.

Government run operations eventually sink under a mountain of union demands, pension obligations, red tape and often rely on subsidies to survive. Giving operations over to private hands frees the government from subsidizing the business. However, without official deliverables, there is no guarantee of service, investment or improvements.

Putting a business plan in place that takes the age of the infrastructure into account is essential. The 2034 4.375% bond yielding 6.5% suggests investors understand the days of abundant cashflow with no reinvestment responsibility are coming to an end.

The challenge, of course, is this sounds very easy to accomplish. The reality is transitioning from one extreme to the other requires such a force of will, and reaction to the status quo, that there is no room for a middle ground approach. There is a very real chance that the reception investors receive from the UK government will be much less welcoming in future administrations.