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the entire of the English water business is environmentally bancrupt


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I posted this thread on Twitter final June, however it’s simply as related at present:


There was a lot dialogue in regards to the possible failure of Thames Water within the final day or so. I have been wanting on the accounts of England’s water firms for the final twenty years. My conclusion is that they’re all environmentally bancrupt. So, a thread…..

There are 9 firms in England that take away sewage. There are extra that offer water alone. However the disaster that the English water firms face largely pertains to sewage so my work has regarded on the ones that take our waste away.

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Thames Water is a kind of sewage firms. The others are Anglian Water, Northumbrian Water, Severn Trent, South West Water, Southern Water, United Utilities, Wessex Water and Yorkshire Water.

It is essential to say that though I used the accounts of every of those firms in my work, the outcomes I’m speaking about right here or for the business as an entire. To get a correct image of the water and sewage business I mixed their accounts into one single set.

Doing so produced some fairly astonishing information. That is what the revenue and loss accounts of the mixed water and sewage firms of the UK appears to be like like for 2022 in isolation, for 2003 to 2022 in whole, and on common over that interval:

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There’s lots of information there. There are, nevertheless, some simple details to focus on.

Firstly, the working revenue margin on this business is 35%. That’s staggeringly excessive, and it goes as much as 38% when different revenue is taken into consideration. 38p in each pound you pay for water is working revenue i.e. revenue earlier than the price of borrowing.

Second, notice the price of borrowing. I’ve generously offset curiosity acquired towards curiosity paid. That also leaves curiosity prices representing a median 20% of revenue. 20p in each pound paid to those firms, on common, goes on curiosity.

That also leaves them worthwhile, although. And so they do pay tax. The common tax charge is nineteen%, however that’s method beneath the anticipated tax charge for this era when the tax charge was as excessive as 30% for a few of it. And far of that tax has not been paid: greater than £8bn has been deferred.

Lastly, of the just about £25 billion they’ve made in revenue over time they’ve paid out each penny, and extra, in dividends. In different phrases, the shareholders have taken 15p in each pound paid for water. There was nothing left for reinvestment, in any respect.

No surprise the water business is in bother. The revenue assertion exhibits that the general public is being fleeced by these firms who’re merely treating the truth that the English client has had no alternative as to who to purchase water from as a way to extract revenue from them.

Issues are, if something, worse if I have a look at the stability sheets. Now I do know these scare most individuals, so I’ll discuss via the small print. This can be a very summarised stability sheet for the  business in 2022:

The business has £77 billion invested in tools. The remainder of its property are some monetary investments, a bit of money and sums owing to it from prospects. To this point, so good.

What is horrifying is what the business owes. The £77 billion of kit is financed, in the primary by borrowings of virtually £55 billion, or extra. It is also funded by the tax not but due of greater than £8.5 billion, which brings down the cash-paid tax charge of the business significantly.

Even the pension funds of these working for the business are contributing to the funding, and there may be extra borrowing of assorted types within the different sums owing, totalling greater than £10.7 billion.

What this implies is that of the full close to sufficient £91 billion invested within the sector greater than £78 billion is funded by borrowing or sums owing of some kind and solely simply over £13 billion is funded by the shareholders.

What that additionally means is that the shareholders present lower than 15% of the general funding for this business. A lot for the concept non-public capital would fund water after privatisation. The fact is that borrowing is doing so.

Once I started to take a look at the information in additional depth issues solely started to worsen. What I used to be actually eager about understanding was how a lot the water firms had invested in tools over the twenty years reviewed.

The reply was, in my finest estimate, that sum was £89.8 billion. In fact, a few of that has now worn out and has lengthy gone from the accounts. Belongings like vans and computer systems don’t final that lengthy in use.

Then I labored out how that funding was funded. There have been simply two methods. One was out of working revenue. For the technically minded, that is attainable utilizing what known as the depreciation cost within the accounts. This sum amounted to £38.9 billion. Clients present this cash

The remainder of the funding got here from the rise in borrowing over the interval. That amounted to £40.5 billion. Different long-term liabilities, that are once more primarily borrowing or pension fund liabilities,  elevated over the identical interval by £10.4 billion.

The web result’s that of the £89.8bn invested, prospects or borrowing of assorted types offered £89.8bn of the funding, which means the shareholders successfully made no funding within the property of those companies in any respect.

This issues for one superb cause. As everyone knows, these companies at the moment are routinely polluting England’s rivers and seashores with sewage. That sewage comes from what are known as storm overflows, though that is a misnomer now, as many launch sewage even after modest rainfall.

That air pollution can not persist. Except it’s stopped we are going to find yourself with out dependable clear water in England. The estimated prices of ending this air pollution do, nevertheless, range significantly.

The business has supplied to speculate £10 billion over seven years, or £1.4 billion a 12 months. The federal government has determined that £56 billion is required over 27 years, or simply over £2 billion a 12 months. The difficulty is neither sum will come near eliminating the crap in England’s water.

The Home of Lords checked out this difficulty primarily based on impartial evaluation and concluded that the most certainly estimate of the price of eliminating all of the air pollution in our water was £260 billion. And that must be finished as quickly as attainable. I counsel ten years.

If that funding of £260 billion was made, we’d have clear water in ten years.

What the business is providing is one thing fairly completely different. Even when they meet the federal government’s demand of them, at finest I estimate that primarily based on formally revealed information they could minimize the crap in water by two-thirds, at finest, by 2050.

So why has the federal government set such a low funding goal that also leaves us with polluted water? The one attainable reply is that they wished to be sure that the non-public water firms wouldn’t go bust by having to spend an excessive amount of.

Let me put that one other method. The federal government thinks that saving the non-public water firms is extra essential than them polluting our water, rivers and seashores with all the prices that can create.

The federal government has made the improper determination. But when the required £260 billion was spent (with extra required to grow to be internet zero compliant) then the water firms would go bust. What which means is that they’re environmentally bancrupt.

The idea of environmental insolvency applies to any enterprise that can’t adapt to make its enterprise environmentally pleasant – as local weather change and ending air pollution requires – and nonetheless make a revenue. What it means is that its enterprise mannequin is bankrupt.

That’s the place the English water business is now. Thames Water is perhaps dealing with environmental chapter, however this business as an entire is in my view incapable of funding the funding required to ship clear water and be worthwhile.

The federal government is perhaps making noises about taking Thames Water into momentary public possession, however that’s meaningless when Thames Water can by no means be worthwhile and ship clear water. There is just one reply for this business now, and that’s nationalisation.

I might counsel that this nationalisation must be with none compensation to shareholders. That’s as a result of their companies are environmentally bancrupt. Suppliers of loans may additionally need to take successful too: they made a nasty determination lending to those firms.

The federal government will then need to assist the business utilizing borrowed funds. I counsel it ought to difficulty water bonds through ISAs to the general public to do that. Would not you need to save in a method that ensures all of us get clear water sooner or later? I might.

And the best way through which water is charged for might need to vary. The concept that all of us pay the identical worth per unit no matter the quantity of water used appears absurd now and may want reconsideration.

However my important level is that the water business has to now be nationalised as a result of it’s not solely failing us already however, on the idea of present plans, will most likely achieve this eternally, and that isn’t solely not adequate, however is de facto harmful to our wellbeing.

Our flesh pressers need to now say it’s time to finish the shit in our water and take management of this business to be sure that we get clear water. In spite of everything, if they can not assure clear water – an absolute important for all times – what are they for?


Lastly, just a few technical notes. First, this evaluation relies on the actions of the businesses really supplying each water and sewage companies in England. It’s not primarily based on the teams of which they’re members.

Second, the conclusions are primarily based on combination information. They can’t be utilized to anybody firm.

Third, the information used is extracted from databases however is appropriate to the perfect of my perception primarily based on that limitation.

And, if you wish to see the report on which this thread relies, it’s right here.

The report is reasonably extra technical and way more referenced than the thread on this difficulty, focussing partially on using sustainable value accounting to exhibit that the English water firms are, in my view, environmentally bancrupt, which means that they can not eradicate their environmental harm and stay in enterprise.




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