News that one of China’s leading wealth funds has taken a 9 percent stake in Thames Water is significant. The investment comes quick on the heels of a Gulf sovereign wealth fund taking a similar size stake in Thames Water’s parent company, Kemble.
It’s a measure of confidence in Britain’s infrastructure technology and role in the world as a safe haven for long term investment crows George Osborne. Liberal Democrats may be inclined to take a different view.
What Osborne fails to mention is that because of increased water-scarcity throughout the world – including the UK – water is set to become a high-price commodity which will deliver sovereign wealth funds a healthy return on their investment.
Thames Water provides sewerage and water services to London and the South East, Britain’s driest and most densely populated region. With 425 people living per square kilometre, it is much higher than the UK average (220) and even more populated than The Netherlands, Europe’s most densely populated country. And because of the pressure placed on water availability by that population density, London and the South East rank alongside Algeria and Tunisia in terms of level of water-stress.
The problem is exacerbated when you consider that Government plans will provide accommodation for an additional one million extra people in London and the South East by 2026. The pressure that places on water provision is immense; the cost of meeting that demand equally immense.
Yes, sovereign wealth funds may provide the money for that infrastructure outlay, but they’re doing it because they see mega money to be made. Have no doubt, it will come at a price. Water pricing, of course, moderates behaviours and cuts down on waste. However, access to clean water is also a UN human right enshrined by the UN Declaration on Human Rights. It doesn’t say at what cost.
Water is a fundamental, and time we begin to view it as a strategic national interest. Water scarcity is an enormous challenge which isn’t going away. So my question is this; as we face significant water constraints, should we be happy about leaving water services to market forces? The Tories’ appetite for ‘light touch’ regulation doesn’t provide much reassurance.
Perhaps, it’s time for Chris Huhne and Vince Cable to challenge the status quo and take another look at what really is in the national interest in terms of ensuring future water provision.
* Andrew Wigley is a public affairs professional who has lived and worked in the US and the Middle East. He began his career working for the Liberal Democrats, first in London and then Brussels. He previously managed community and public affairs for an oil company with facilities near In Amenas.
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7 Comments
Should never have been privatised.
In the continuing absence of anything other than monopoly provision of water and sewerage services (I can’t shop around for mine yet – can you?), the water industry should surely be the number one candidate for re-nationalisation or similar public ownership (…”regionalisation”?).
Monopoly is the antithesis of Liberalism – and the only thing slightly better than a private monopoly is a public one. Although not a lot.
This particular Lib Dem is certainly inclined to take a different view.
I remember years ago – about 1990 or so – being told by a consultant to the water industry how skilful lobbying had created an ‘issue’ about blue baby syndrome due to elevated levels of nitrates in water. This is not serious, is easily reversed by giving bottled water for a day or two and the last case (if I remember him rightly) was in the 1950s. It is also expensive to remove from the water supply. Nevertheless, the worst affected water company agreed to spend the tens of millions necessary to do so – which might just be connected to the fact that they are allowed to make a percentage on their investment. So, yes, light touch regulation is like to be very expensive given the scale of investment projected and opportunities for mischief.
Also we need UK-owned utilities because they are just the sort of invesments that that are needed to support current and future pensions.
Interesting that one of the two state owned water companies in the UK is in N Ireland. Which had huge water shortage problems last year due to years of under investment due to political pressure not to raise prices.
Perhaps we could find some real issues to worry about ?
I used to work for Thames Water. As a kid in the 80s, I opposed water privatisation. As it happens, the privatised water companies have (in real terms, allowing for inflation, etc) invested far more in infrastructure, etc, then the state-owned companies ever did. They did this because they were investing in pursuit of a long-term profit. Such investment is surely a good thing, and what would be happening today if the money for sewer upgrades, etc, was having to be found by by government? By the way, Thames Water hasn’t been British-owned for years. Sinc 2006, it’s been owned by Kemble Water, a consortium of investors assembled by the Australian investment bank Macquarie. Prior to that, it was owned by the German utilities giant RWE.
@Simon McGrath
“Interesting that one of the two state owned water companies in the UK is in N Ireland. Which had huge water shortage problems last year due to years of under investment due to political pressure not to raise prices. ”
It has a long history.
When I was a boy in Northern Ireland in the 1950s, water supply was a matter for local councils, except Belfast, where the public Belfast Water Commissioners served a larger area than Belfast Corporation. You paid for water in your domestic rates; there was massive political resistance to the introduction of a separate water rate in the 1990s. Some small country towns had under-engineering systems then, though people in Belfast and better resourced towns looked down on them in amusement.
We lived in a house that was in a new suburb at a higher altitude than most of our town, and suffered supply problems (Lack of incoming water during the day) both in extreme high summer and extreme cold then. Of course, we knew this and could deal with it.
As water gets more scarce, perhaps a regulation could come in that would give each household a quota of.cheap water, after which the price rises dramatically.
That would ensure that each household would at least get the necessities at a cheap price and then those who were being frivolous could pay for it.
Of course, there are other priorities, but it shouldn’t just be left to the private sector to resolve what will become a national policy priority in 15 years time. Take the example of the last Government’s muddled approach to energy. It took two reviews before they woke-up and realised the country was going to face significant energy shortages within 10 years. Short-sighted and lack of planning. The solution was to go nuclear.
The problem now facing the Government is that the nuclear industry has made it clear it needs more state inducements to meet the £100bn price tag associated with the cost of building new nuclear plants as well as decommissioning and waste disposal, That’s not a cost the industry is prepared to bear alone. Yes, that’s an issue for the private sector, but if it’s not commercial business won’t foot the bill.
(I’m also tempted to mention that in 2004 on the brink of bankruptcy British Energy, the then major supplier of nuclear energy in the UK at the time had no option but to turn to the Government for a £3bn bail-out and the Government had no option but to provide the money).
I don’t necessarily subscribe to the view that state ownership is best. But I do think as climate change and population growth begins to impact the UK, notably the South East, a strategic review of meeting future water requirements needs to take place. The lesson over the past ten years from the two half-baked Government energy reviews and flip-flopping about the role of nuclear, is that we need to wise up to the enormous challenge of pending water scarcity and set a strategy which provides adequate time for adaptation. Do it now and prepare, rather than leave it until the problem is upon us.