The UK's Water Crisis: Trust, Transparency, and the Battle for Clean Water

Water pollution in the UK is not just an environmental issue—it's a full-blown crisis of trust and corporate accountability. This week we're peeling back the layers of this complex problem, shedding light on the alarming pollutants invading our waterways, the contentious practice of billing customers for corporate negligence, and the disturbing rise in waterborne diseases. Hear why supplier trust is critical and recent comments from  the Environmental Audit Committee as they unpack the dire need for transparency and action within the water industry.

We explore the financial undercurrents shaping the water sector, probing into the £100 billion investment quagmire and the foreign ownership landscape of English water companies. As we navigate the murky waters of private versus public ownership, we question whether consumer health and trust can ever be fully restored in the face of such systemic failures. Join us as we confront the uncomfortable truths and demand urgent reforms to ensure the water that flows from our taps is not only clean but responsibly managed.

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Transcript

Tony Hines: 0:06

Hello, welcome to the Chain Reaction Podcast. All about supply chain advantage. Great to be here. Well, what happens when suppliers lose trust? Well, I've been following closely over the past year or so stories about water in the United Kingdom and, to be precise, the water companies and the failure of Ofwat and the Environment Agency to protect water supplies, and there's no doubt that that's become a critical issue and it seems now that water companies want to charge enormous amounts of money to customers to put their mistakes right. Amounts of money to customers to put their mistakes right.

Tony Hines: 0:49

Just this week, consumers in Devon, in a town called Brixham, have been told by Southwest Water that it found traces of microscopic parasites that cause diarrhoea, and 22 cases are already confirmed. Just hours before that, lake Windermere had raw sewage pumped in for 10 hours by United Utilities and they failed to report a fault. It took them 13 hours to report the fault and it came when the cross-party panel of MPs were told that samples from water from rivers and lakes across the country had found traces of E, coli, bacteria, viruses, toxic chemicals and even radioactive substances. So what's going on in the rivers and the water? Well, somebody has not been doing the job and I think it comes down to water companies, it's their primary responsibility, but the regulator doesn't appear to have any idea of what's going on either, and they don't seem to be active enough in making these water companies responsible for the contracts they've undertaken. Of course, this all goes back to the privatisation of water supply, which is probably going to go down historically as one of the most irresponsible moves a country could make. The critical questions appear to be what's going on with pollution in the UK water supply? Who's responsible? What's being done about it? Why are consumers going to have to pick up the tab for the irresponsible, neglectful and negligent approaches of suppliers? Is the government ultimately responsible for malfeasance or misfeasance? Is the regulator ineffective?

Tony Hines: 2:23

England's rivers are contaminated by a cocktail of sewage, agriculture and road pollution. The main cause of pollution Excessive use of fertiliser and pesticides in agriculture, untreated sewage released by water companies and runoff from roads and towns which contains pollutants such as oil. 18%. Nearly 50% of the groundwater used for public supply in the UK is affected by pollution. When it comes to who's responsible, the responsibility for water pollution in the UK is shared among several parties Agriculture and rural land management are responsible for 40% of the pollution, the water industry for 35% and urban transport for 18%. So what's being done? The UK government set out plans to reduce water pollution. These included a new legal duty on water companies in England to upgrade wastewater treatment works by 2030 in nutrient neutrality areas to the highest achievable technological levels. A new nutrient mitigation scheme has been established by Natural England.

Tony Hines: 3:30

The government has legislated through the Environment Act 2021 for stronger powers for regulators, for tackling pollution and for greater transparency with the public. Well, these are all futuristic. So what's been going on? I ask the question what's been going on? Well, it seems that what's been going on? Well, it seems that somebody's not been doing their job in the past. Why are consumers paying United Utilities? Consumers bills are set to rise by 7.8% between 2023 and 2024 and 2024-25. This is due to the associated with improving infrastructure and treating water to make it safe for consumption.

Tony Hines: 4:06

Government responsibility is the issue. They're responsible for setting regulation and policies to protect the water supply and they've legislated for stronger powers for regulators. But it's all futuristic, isn't it? What's been happening? The key thing is how effective have they been with these measures and their enforcement? Well, not very, is obviously the answer.

Tony Hines: 4:28

The effectiveness of the regulator, the Environment Agency, as the regulator has taken significant action to improve water quality. For example, over 72% of UK bathing waters were classified as excellent in 2019. Well, that means nothing, does it? It's drinking water we're worried about not bathing Up, from just 51% in 2019. Well, that means nothing, does it? It's drinking water we're worried about not bathing Up, from just 51% in 2010. Hmm, low base. How accurate are these numbers?

Tony Hines: 4:53

However, challenges remain and the effectiveness of the regulator is dependent on the various factors, including resources, enforcement powers and cooperation from water companies and other stakeholders. Well, it's not about cooperation. They should be regulated and they should be fined, and the bosses of these water companies should be served with criminal charges if they fail to meet their obligations. I was looking at one of the chief executives pay in one of these water authorities that's heavily in the news about pollution, and he received £2.2 million as his salary. So they're getting paid ridiculous amounts of money for not doing the job, and if you listen to the feedback from the government and the parties involved, they tend to be complacent and they tend to be inaccurate. It's now becoming a very serious public health issue and consumers are rightly concerned, and the question I started with is what happens when supplier trust is broken, and that's what's happening here, and it's been happening fast in the past few years.

Tony Hines: 5:59

But it all began with the privatization of water companies in the UK in those frenzied times when privatisation was seen as something good. It would create profits, it would remove cost from government, it would generate profits that could be reinvested in those water companies and that would take away some of the cost from the public purse. But what happened is that the shareholders have been paid out and the public purse is still paying, only in bigger amounts, because the investment hasn't been undertaken with integrity over the privatised times. Certainly that appears to be the evidence that's coming out of these discussions. Dr Rob Collins, head of Policy and Science at the River Trust, told the Parliamentary Committee this week that there was no monitoring of pathogens in rivers. Earlier this week, ministers announced that 12 river systems would now be tested for bathing water status. Campaigners have referred to this as a modest start, and you'll remember the Oxford Cambridge boat race on the River Thames back in April, where some of the crew were found to have E coli and they were said to be off the Richter scale when it comes to the measures. So it seems that the evidence is all around us, but little is being done. And then you've got the incident in Brixham that's occurred this week and that's putting the public at risk. They're being told to drink bottled water and they're also being asked to boil water.

Tony Hines: 7:25

The Ofwop boss, david Black, was asked by MPs about the proposed increases in water bills. It's not just United Utilities that are putting up water bills, it's every water company, and they're all seeing this as a moment in which they can really push up the bills in the cost of living crisis. So most people's bills are going to be rising by at least £20 to £30 a year, and probably more. Of course, costs have already gone up over the past few years. The Liberal Democrats have attempted to amend the criminal justice bill to make waterbosses criminally liable for polluting the waterways, but they've failed to secure enough backing from MPs. The question is why. Some would argue, of course, that no one would want to do the job, but actually it would make them far more responsible in their job if they were criminally liable. It's unsatisfactory all around the whole affair.

Tony Hines: 8:19

And then you have Stuart Colville, who's Deputy CEO of Industry Trade Association Water UK, and Alistair Chisholm, director of Policy at the Chartered Institute of Water. They appeared before the Environmental Order Committee this week. Mr Colville said he couldn't comment on Windermere in detail, but the number of serious pollution incidents fell to the joint lowest on record in 2023. Not good enough, is it? The Environment Agency defines a serious pollution incident as one where harm is caused to the environment, people or property, and while there have been serious pollution incidents, they're arguing it was low in 2023. Raw sewage poured into England's rivers, lakes and coastal areas for 3.6 million hours in 2023, making it the worst year on record.

Tony Hines: 9:03

£100 billion is going to have to be spent on water infrastructure, according to Mr Colville, between 2025 and 2030. And four billion of that would go to upgrade sewage works. Well, where's the other 96 billion going? 10.7 billion would be spent on reducing storm overflows, but there's little transparency in this industry. It's very opaque and even when you get these people who are responsible for delivering the service and the supply, they're not really answering the questions and they seem very complacent and there doesn't seem a will to do much about it, and the watchdog seems ineffective, completely ineffectual. Fergal Sharkey, of course, has been a fierce campaigner tackling these water problems and he's very critical of everything that's not being done at present. The water industry is one which is in need of desperate reform after years of complacency, and it really is time that these water authorities were taken into public ownership once again. It's the only way to ensure public health.

Tony Hines: 10:03

Of course, as a customer, it's not possible to go elsewhere. These companies have a complete monopoly when it comes to regional supplies, and so if you live in the northwest of England, you can't suddenly turn around and say, well, I don't want to be with United Utilities, I'd like to go to Southwest Water, although why you'd want to do that after the Brixham incident is doubtful. But in all seriousness, you can't move to another supplier. So these suppliers have a monopoly, and that's why they're complacent. They know that they've got millions of consumers that will pay bills because they have no other option. It's the Hobson choice. So here we are with supplier trust in tatters. Customers would probably like to switch their supplier, but they can't. So if they can't and we've got this monopoly that isn't doing its job, it's about time that the government stepped in and took action.

Tony Hines: 11:03

There have to be better ways to manage these water systems, and it's not good enough just to continue pushing out pollutants or saying, yeah, we have to every time it rains heavily. The climate change is ensuring that we've got to put more sewage through the drainage system. Well, how long can that go on? Long-term exposure to water pollution can have serious health effects, and here are some of the potential risks. It can have infectious diseases contaminated water can be a major source of waterborne disease, such as cholera, dysentery and hepatitis. Prolonged exposure to certain chemical contaminants has also been associated with the increased risk of cancer, such as bladder cancer, kidney cancer and liver cancer.

Tony Hines: 11:46

Development issues in children's. Contaminated water can lead to cognitive impairment and stunted growth. Reproductive issues can occur from hormonal disruptions caused by certain water pollutions and there can be abnormal growth and development. Studies suggest that pollution can be abnormal growth and development. Studies suggest that pollution can lead to various cardiovascular conditions. It's important not to scaremonger, of course, and it's important to look at the analysis and the data that's coming out, but I think one of the things that's clear about the problem at present is that that data is just not good enough. We need to have better data about what's going on. It needs to be far more transparent, the contract with the consumer needs to be much clearer and the responsibilities that these water authorities have been given have to be enforced by an effective regulator.

Tony Hines: 12:33

Now you may be surprised to know that the English water companies are at least 70% owned by foreign shareholders. I'll give you some examples. Anglia Water is owned by pension funds in Canada, australia and the UK, as well as investors in Australia, abu Dhabi and the UK. Northumbrian Water 75% owned by CK Hutchinson Holdings based in Hong Kong, and 25% owned by New York private equity firm KKR . Seven Trent Water, listed on the London Stock Exchange. Shares are traded. Southern Water the largest stake, 62% held by funds managed by Australian firm Macquarie. They were also involved in Thameswater. You might recall Thameswater stakeholders include companies owned by the governments of Kuwait, abu Dhabi and China, as well as a Canadian pension scheme and a UK university's pension scheme, uss United Utilities, listed on the London Stock Exchange. No further information. Wessex Water fully owned by YTL, a Malaysian corporation listed on the stock exchange there. Yorkshire Water is over half owned by Hong Kong investment firms and a third owned by the Singapore government. So the UK has given its water companies to foreign investors and those investors are only there for one purpose they expect a return. They're not interested in the investment in the water system beyond creating a return on investment.

Tony Hines: 14:02

The privatisation of these water companies took place in 1989, and it was then seen as desirable. The water industry wasn't high on the list of priorities for ministers when its funding came out of the same part as schools, hospitals and police. Officers so it was argued. Officers so it was argued. But after decades of underinvestment by successive governments, water quality was poor, rivers were polluted and beaches were badly affected by sewage. The government believed that privatisation would lead to increased investment, improved infrastructure and better service delivery. Well, how wrong could they be? It's become a lot worse. We have crumbling infrastructure, poor quality water, water that's poisoned water, water everywhere, but poisoned sewage discharges, regular occurrence E coli all kinds of potential risk factors to damage public health.

Tony Hines: 14:54

There are some ongoing fallacies, of course. That privatisation improved water quality and that we've got world-class drinking water. That's according to waterorguk, and you'll remember that the United Nations issued in 2015 its Sustainable Development Goals and one of those goals was to have access to clean water. Well, that goal is now severely under threat in the United Kingdom. It was supposed to have an effect on efficiency and innovation, and the supporters of privatisation argued it led to increased efficiency, improved resilience and innovation, but there's no evidence of that. The infrastructure development promised has come through increased debt funding. It hasn't come from investors. It's come from borrowing on the strength of assets that they took out, and those debts are now a serious issue and they're increasing the cost to the public.

Tony Hines: 15:48

There are various claims about environmental improvements. Two-thirds of beaches, it's argued, are now classed as excellent, compared to less than a third 25 years ago, and wildlife has returned to rivers, some of which were biologically dead since the industrial revolution. But actually we're on our way back there with the latest data that's emerging about the pollution in the rivers, and the truth of the matter is there are claims and counterclaims but we don't really know because we haven't got the data, because the testing isn't done on a regular basis to gather that data, to see how rivers and river quality and water quality is actually changing over time, and this data needs to be far more transparent. Consumers need to know about it. They need to have the data. It's the only way to rebuild public trust, which at present is very low. We've had increased sewage overflows. Water companies discharged raw sewage into rivers and coastal waters in England more than 400,000 times in 2020, and that was up 37% on the previous year, and you've heard some of the latest statistics earlier in this program. So, all in all, not a very encouraging picture of the privatised companies that now manage water systems in the United Kingdom.

Tony Hines: 17:11

Now you may remember or may have read Samuel Taylor Coleridge's poem Water, water Everywhere, and there's a famous line in the poem which says Water, water everywhere and not a drop to drink. Well, england's becoming such a nation. The ancient mariner returns to tell us that there is no drop to drink. Perhaps we could update the poem. Water, water everywhere Needs our love and needs our care. Let's protect it, keep it clean for our future, yet unseen.

Tony Hines: 17:51

Well, that's it for this week. I hope you found out something about the water industry. But, more importantly, wise supplier trust is an important element of relationships and building those relationships with consumers. Consumers need to have trust in the suppliers that serve them. Now I had an interesting conversation this week with Josh Simon, and he's the global risk and receivables director for a company called jazz worldwide, and he was telling me that he listens to news items to assess risk as one of his inputs to understand and assess global risk when it comes to establishing credit limits in particular countries and with particular companies, and you can hear that episode in full.

Tony Hines: 18:41

In the next couple of weeks it will be coming your way and I'd recommend that you stop by the Chain Reaction website and pick the episode up and have a listen to what Josh had to say.

Tony Hines: 18:52

Josh is an expert in the field of credit risk and he's been managing credit risk for both JAS in the past three years and, of course, for the past 30 years or more at General Electric. So you'll want to stop by and have a listen to that one it's a great episode Chain Reaction website and pick up any episodes you've missed and also subscribe. You'll be the first to know of new episodes when they come along. And don't forget about the great episode coming on Credit Risk with Josh Simon. Well, that's it for this week. I hope you've enjoyed the episode and I'll be back next time with another episode of the Chain Reaction podcast. But until then, of course, you'll be able to pick up the News Roundup 12 noon Saturday or listen to one of the 250 episodes that you've missed. So I'm Tony Hines, I'm signing off and I'll see you next time. Bye for now, thank you.