Richard Murphy did a long thread on this yesterday. His conclusion is that nationalisation would seem inevitable in view of the WC's current financial situation. It is worth reading if one seriously wants to find out what is happening .
It is not 'speculation' it is based on the facts of the water companies' financial arrangements.
Why should we take notice of him?
From his introduction:
First, I should lay out my credentials for saying what follows. I am a professor of accounting practice at Sheffield University Management School. More importantly, I have been a chartered accountant for forty years and I have bought and sold a lot of companies.
This matters because a lot of what of what is being said right now about the affordability of various options when it comes to our water companies and other utilities is based on political rhetoric and not very much at all on how nationalisation works and how it can be paid for.
www.taxresearch.org.uk/Blog/2023/07/04/its-time-we-took-water-nationalisation-seriously-it-is-the-only-viable-option-for-the-industry/
A follow up post this morning adds more
www.taxresearch.org.uk/Blog/2023/07/05/the-case-for-water-nationalisation-is-growing/
If I understand this correctly he is saying that water companies which have 'borrowed' via index linked bonds are being hit by the interest rate rises which have greatly increased their interest payments to bond holders.
He is saying that water company operating profits are being used to pay tax, bond interest and shareholder dividends
20p in every pound paid to them by us, the water consumer, has gone on interest charges, and another 15p has gone on dividends. The remaining 3p has gone on tax. There has never been profit left over to invest in the new equipment the industry needs.
The scale of the new investment that is required is massive. The government says it's £56 billion. The House of Lords says it is £260bn. Either way, the water companies can only raise this by charging more, borrowing more or getting the shareholders to finally cough up more.
He is saying that Thames water, at least, is struggling to raise capital for investment in the infrastructure work need to deal with the sewage discharge problems.
^ ..... Thames Water was in more trouble than it claimed because although we knew it had sought £1.5 billion in new funding, it had only actually raised £0.5 billion. At the time, I was unaware of the matters referred to in an FT report on yesterday's hearing at parliament on its finances.^
They report:
Thames Water needs billions of pounds more in cash at a time when investors lack the “appetite” to put more money in the industry, the water regulator said on Tuesday.
David Black, chief executive of Ofwat, told a House of Lords committee hearing that Britain's largest privatised water utility was struggling to secure £1bn in the short term, after a year of trying to do so.
As to WHY this has happened, I suppose one can only point to poor regulation and, perhaps, the incompatibility of running a company mainly to produce profit for shareholder dividends with the need to provide a basic, efficient, and trustworthy, public service.
