Players of the property-dealing board game Monopoly have never greatly loved the utilities—the water and electric companies, which sit dour and gray among the more colorful Park Place–type investment opportunities. Ambitious players consider the utility companies boring and worthless, even if a few steadier, less flashy contestants regard them as surprisingly O.K. investments that pay modest dividends.
In real life, though, utility companies—those that deal in water in particular—are potentially terrific financial assets. Literally everyone needs water, and the infrastructure for getting it to people’s taps is so cumbersome that supplying the stuff lends itself to an actual monopoly.
Indeed, one of the most profitable businesses of all time was a private water company in London. In 1613, an entrepreneur was granted exclusive permission to build a 40-mile canal, called the New River, to bring water from the countryside north of London and distribute it through the city in pipes.
Nearly 300 years later, in 1904, when London’s water supply was compulsorily bought into public ownership, a share in the New River Company that had been purchased in 1613 would have earned an average annual yield of 267 percent, plus a 232-fold increase in each share’s value, making it an investment that vastly outstripped inflation, gold, and even London property.
Today, over 400 years since the New River was built, incredibly, it still supplies 10 percent of London’s water. Most of the rest is extracted from the River Thames and from boreholes that suck former rainwater up from the chalk aquifers that lie under 300 feet or so of claggy, impermeable London clay.
Yet, shockingly, the task of piping water to London’s nine million people and removing their sewage has lost its sparkle to such an extent that Thames Water, the private company that was given the supply monopoly by Margaret Thatcher’s government in 1989, is $20 billion in debt and on the point of going bankrupt. Authoritative figures across the political spectrum say it has been ravaged by corporate greed—this in spite of the company being, in theory, meticulously regulated by a government oversight body.
Thames Water’s failure is more than a business fiasco that will likely leave consumers facing soaring water and sewerage bills for years to come. Thames doesn’t even seem to be doing its job adequately.
Despite biblical amounts of rainfall, thanks to climate change, and with streets, basements, and rural meadows flooding regularly, London and the south of England are paradoxically so short of water that one of the stopgap fixes being mooted is shipping it in from Norway. Reservoirs are widely regarded as what London needs rather than tankers of fjord water, yet none have been built in 35 years, and plans for a giant reservoir northwest of the city are bogged down in a planning-law quagmire.
On top of this, Old Father Thames, along with every other river in England, periodically flows with raw sewage that undersize, worn-out, underfunded treatment plants can’t handle. Human waste is routinely sighted in the Thames as if we were living in medieval times all over again. The level of E. coli in the river gets so high that crews in this year’s annual Oxford-University-versus-Cambridge Thames boat race suffered vomiting attacks.
“To have wrought the failure of Thames Water, Britain’s biggest water company, running what has to be one of the most predictable, easiest, and safest businesses in the world, is almost an achievement,” says Nick Higham, a distinguished former BBC correspondent, now a historian, who in 2022 published a book on London’s water supply, The Mercenary River. He supports the predominant view that under-investment combined with avariciousness by privatized companies is the main reason for the growing crisis.
Human waste is routinely sighted in the Thames as if we were living in medieval times all over again.
Former punk-rock star Feargal Sharkey, once of the Undertones, who has become an unlikely campaigner against Britain’s water monopolies—Sharkey is a fly fisherman whose favorite waters north of London are now often too polluted to fish—frames the water predicament perhaps more starkly still.
“This is a complete and utter failure of regulation and political oversight,” Sharkey tells AIR MAIL. “England is the only country in the world with a 100 percent privatized water industry. As a result, these companies, given state-granted monopolies, have done exactly what you’d expect. They’ve abused their dominant monopolistic position, fleeced the businesses, and fleeced the consumer.”
Higham also talks of collusion between supposedly neutral regulators and the privatized water companies, with their penchant for paying their principals large salaries and bonuses, even as the sewage spills into rivers. “I was told recently by an extremely senior person in the water industry that the water companies and the regulators have conspired—that was the actual word he used—between them to keep the levels of investment at the absolute lowest level that they could in order for the shareholders to get a return.”
That Thames Water has accrued a $20 billion debt in the 35 years since the Thatcher government privatized water is all the more impressive because they were handed the business debt-free in 1990. The original dream of Thatcher’s Conservative radicals was for large numbers of citizens to become owners of the water companies, the equivalent of steady-but-sure Monopoly players who opt for utilities.
What happened—inevitably, say campaigners such as Sharkey—is that big investors swooped in. Most of them were foreign and had little heartfelt interest in the quality of English and Welsh water and the efficiency of sewerage plants. Today, 70 percent of England and Wales’s water industry is owned by pension funds, banks, and sovereign-wealth funds from China and Canada to the Middle East and Australia. The Ontario Municipal Employees Retirement System alone owns 32 percent of Thames Water.
One such previous owner, the Sydney-based bank Macquarie Group, draws particular opprobrium from Londoners as they pump out their flooded basements, and rural dwellers claim to survey fields swamped with overflowing Thames water that’s often studded with human excrement. “Macquarie have been particularly unscrupulous and greedy,” says Higham. “You can easily see how they’ve earned their nickname, ‘the Vampire Kangaroo.’” However, under Macquarie’s part-ownership from 2006 to 2017, pollution incidents fell by 75 percent, according to bank documents. The Australian bank also commissioned the Thames Tideway Tunnel, a massive sewer system expected to improve the health of London’s rivers when it becomes operational next year.
A spokesperson for Macquarie Group tells Air Mail, “We supported Thames Water as it delivered record levels of investment, which enabled the company to reduce leakage and pollution incidents while improving drinking water quality and security of supply. Much more is needed to be done to upgrade its legacy infrastructure, but when we sold our final stake in 2017 the company was meeting all conditions set by the regulator and had an investment grade credit rating.”
The handing over of Britain’s water industry to overseas investors is part of a curious wider trend of Britain allowing its most fundamental infrastructure to fall into foreign hands.
Whether this is due to incompetence, corruption, parsimony, or a spin-off of old-fashioned British diffidence—in the form of a chronic lack of competitiveness—is up for debate. Nevertheless, it’s startling how many institutions have been wholly or partially sold off to foreigners in recent years. British Airways is now owned by a Spanish company; Royal Mail is being bought by a Czech billionaire; Harrods is owned by the Qataris; British train lines are in large part owned by companies across mainland Europe; airports, seaports, power stations, aerospace companies, buses, and whole swathes of industry from steel to tech have non-British owners.
Part of the problem is likely that when the English try to plan their own big projects, they have a habit of going expensively wrong. A recent essay by a group of academics, “Foundations: Why Britain Has Stagnated,” cites tragicomic stories of huge infrastructure plans for railroads, tunnels, and so forth, generating mountains of documents, but no actual infrastructure.
“Macquarie have been particularly unscrupulous and greedy,” says Higham. “You can easily see how they’ve earned their nickname, ‘the Vampire Kangaroo.’”
The massive reservoir that London and southeast England so desperately need could well be on course to meet the same fate, of collapsing under bureaucracy, inertia, and rampant NIMBY-ism. Everyone wants it, but not near their homes. Accordingly, it’s been known for years as the South East Strategic Reservoir “Option,” and the optimistic date it could start supplying water is 2040.
If one were defending the management of Thames Water and other privatized water companies currently circling the drain, you could argue they have been the victim of mitigating circumstances.
Climate change is just one. Typical London weather—weeks on end of gentle rain that ultimately seeps down into capacious chalk aquifers—has given way to sudden monsoon-like deluges, which the drainage system, often hundreds of years old, can’t cope with. The water that collects after these bursts of rain is further hampered from soaking into the ground by a huge increase in the number of London homes paving over their yards, both front and back, to park cars and to make a more easily maintained garden.
Another significant factor is that the population of London has grown hugely, from 7 million 25 years ago to more than 9 million now, and every last one of those people needs water. Still another is that it’s become part of Thames Water’s remit to bore down to collect excess water that, if allowed to gather, would flood Tube-train tunnels. This used to be done by breweries and other industries that drilled boreholes, but now that many of those have disappeared, Thames Water has become responsible for absorbing the not inconsiderable expense of doing it itself.
Despite these obstacles, when asked if Thames Water should be afforded a scintilla of sympathy, the resounding consensus among experts and consumers alike is “absolutely not.”
“The Victorians found out the hard way,” says Higham, “that it’s not a good idea to leave something as important as the water supply in the hands of private, profit-making companies who are obliged by law to put their shareholders ahead of the public interest. So, the story of water in the 19th century is the gradual realization by government and others that you needed either to regulate or, preferably, take water supply into public ownership.” Thames Water did not respond to air mail’s request for comment.
Solving the water crisis, especially in the area served by Thames Water, where a quarter of Britain’s population lives, is one of the main problems dampening the feel-good atmosphere around Sir Keir Starmer’s new Labour government.
Labour took power after a landslide victory last July, and already news of a special commission has leaked, so to speak, proposing to make all water supply in England nonprofit.
How well this would work and how long it would take to implement is debatable. But it could well make the world’s investors wish they had heeded the example of more ambitious Monopoly players and parked their money in something other than utilities. After all, they don’t make real-life monopolies—or water—like they used to.
Based in London and New York, AIR MAIL’s tech columnist, Jonathan Margolis, spent more than two decades as a technology writer at the Financial Times. He is also the author of A Brief History of Tomorrow, a book on the history of futurology
