On Wednesday 28th June the CEO of struggling Thames Water, Sarah Bentley, was forced to step down, raising the prospect of the government having to nationalise the group. Thames Water’s predicament raised the question: amongst dire performance and mounting debt, can England’s privatized water sector survive?

Dead fish. Sewage releases into watercourses regularly kill hundreds of marine animals.

The likely trigger for her resignation was shareholders’ desire for fresh leadership before investing any more funds to save it. The background was the poor performance of the water supplier, especially on pollution and leakage, which has drawn public and media fury. An Environmental Performance Assessment carried out by the Environment Agency shows just how bad the situation is: in 2021 there were 271 sewage pollution incidents up from the already high 258 in 2011, of these 160 were foul sewer incidents and 66 came from sewage treatment plants. Furthermore, one quarter of all the company’s water is lost to leaks each year. Finally to add insult to injury, Bentley will receive £1.6 million of pay and perks this year despite leaving Thames Water with £14 billion of debt. 

Above all else, massive investment is needed to repair leaks, upgrade sewage treatment plants and upgrade to a smart water management system. Thames Water has issued a 25 year, 110 page ‘Drainage and Wastewater Management Plan’ promising to fix things but unless they secure extra money to carry it out their promises are meaningless. Shareholders already invested £500 million in March but much, much more is needed. This is part of the broader problem of underinvestment in England’s water infrastructure after privatisation. Since 1991 shareholders, who are mostly foreign corporations, have been paid enormous dividends by suppliers who have racked up enormous debts in the process while leaving our water infrastructure to deteriorate. Clearly privatisation isn’t working currently. 

However, this does not mean a hugely expensive renationalisation is the answer. ‘Better regulation’ is not enough either though, as in my opinion Ofwat is chronically unwilling to use its powers. Instead, injecting some real market competition into this natural monopoly must be done. The number one motivation for companies to improve their price and service is the fear of losing customers, so let’s allow ordinary customers to choose between water suppliers, the same as in industrial firms and the same as the electricity sector. Giving consumers power to withdraw their demand from failing suppliers would create a real price mechanism and encourage efficiency. As an added bonus bloated executive pay might fall as well.