24 Years Later: A Look at Water Privatisation in England and Wales
In England and Wales, the provision of water and wastewater services was moved from the public to the private sector in 1989. This change was part of a broader government strategy, which also encompassed the telecom and energy sectors, to privatise the ownership and management of public assets.
For 16 years prior to privatisation, water and wastewater services in England and Wales were the preserve of catchment-based public water authorities. During the 1980s, water authorities became increasingly affected by limits on public sector borrowing that were imposed to contain inflation. It was challenging to fund asset maintenance and improvement. In addition, the cost of meeting water quality and environmental directives set by the European Union (EU) grew.
The government’s solution to meet the funding gap was to change the water authorities into private companies. Because 99 percent of households were already connected to the water supply network and 96 percent also connected to the sewerage system (Water Companies Association, Waterfacts, 1992), opportunities for organic growth by the new “water companies” were limited.
As a result, investment was made more attractive by the formation of holding companies that were able to undertake other forms of commercial activity and own the new water companies. Public capital was injected into the holding companies, which were then successfully floated on the London Stock Exchange. England and Wales’ 10 private water and wastewater companies were formed. There are also a number of smaller water-only companies that have existed in private ownership for many years.