January 23, 2022

The British are outraged by the dividend policy of private water supply companies

The British are outraged by the dividend policy of private water supply companiesThe British are outraged by the dividend policy of private water supply companies

UK water companies have generated more than £ 2 billion a year on average since they were privatized three decades ago, according to The Guardian..

Dividend payments to shareholders between 1991 and 2019 amounted to 57 billion pounds, which is almost half of the amount they spent on the maintenance and improvement of pipes and treatment facilities in the country during the announced period.

According to some experts, such a dividend policy does not allow for significant national infrastructure work to improve the water supply and sanitation system..

When Margaret Thatcher sold the water supply industry in 1989, the government wrote off all debt in the segment. But according to the analysis David Hall and Carol Yerwood from the international research arm of public services at the University of Greenwich, nine privatized companies in England have accumulated £ 48 billion in debt over the past three decades, almost equal to the amount paid to shareholders.

Hall believes companies have turned to borrowing to pay dividends rather than investing in infrastructure projects.. 

They have paid £ 17bn in dividends over the past 10 years, and directors’ salaries have skyrocketed. The income of the highest paid managers of nine water utilities last year increased by 8.8%, to 12.9 million pounds sterling. The highest paid executives were at Severn Trent and United Utilities.

Ellen Lees of the We Own It group of companies believes that instead of paying out billions to shareholders, companies could invest in the infrastructure the system needs.

«It’s time to put an end to this farce that harms the public and destroys the environment. It’s time to transfer our water to state ownership», – she added.

Government-owned Scottish Water has invested nearly 35% more per capita in infrastructure since 2002 than privatized UK water companies. Scottish firm charges population 14% less and does not pay dividends.

Water supply companies in England have been criticized by the EPA. IN the last evaluation Emma Howard Boyd, the chairman of the agency, described the work of companies in 2018 as «totally unacceptable».

«Instead of progressing, the situation only got worse. And every year we see more and more serious pollution incidents that damage wildlife, local environment and public health.», – she said.

Boyd also noted that nothing suggests significant improvements anytime soon..

Dieter Helm, professor of economic policy at the University of Oxford, said these companies are behaving quite logically.

«No wonder capitalists behave like capitalists. The question is different. On the face – the complete inability of regulators to control water companies», – he thinks.

Industry regulator, Ofwat, recently challenged companies to their dividend politicians.

Anglian Water says debt is not used solely for dividend payments. «Borrowed financing is the most economical and legal way to finance new infrastructure. Customers benefit from this as rates become cheaper. That’s why we do it», – said a company representative.

He stated that investors have not received dividend payments since 2018. However, according to the company’s annual report, dividends totaling £ 67.8m were paid in 2019.

In response, an Anglian Water spokesman told the regulator that this amount had been retained and used to fund the group’s operating expenses and working capital requirements..

An Ofwat spokesman noted that over the past several years, the regulator has challenged the approach of water companies to their dividend policy.. Market participants are expected to have strong governance mechanisms and become fully transparent about how dividends reflect fulfillment of obligations to customers and the environment.