The water industry is in desperate need of reform, but South West Water’s consumer share offer is too little too late

While South West Water's consumer share offer looks good on paper, in practice it amounts to little more than a cheap gimmick. The broken water industry needs deeper reform which truly puts ownership back into the hands of customers and workers.


South West Water have handed in a very different kind of business plan to the regulator yesterday. Rather than simply setting out infrastructure investments, customer bills and investor returns, their “New Deal” puts forward proposals for a customer share offer, whereby every household gets a share of the business, annual dividends on their share if the company makes a profit, and a vote at an annual meeting.

The water industry is in desperate need of reform. Expensive, unaccountable and unfair, the consumer voice is too often secondary to the interests of distant investors. As set out in our recent Democratic Public Ownership for the 21st Century paper, ownership the water industry is concentrated in a small number of individuals, banks and funds which profit from increasingly expensive customer bills. As bills continue to rise, so do executive pay, the fines levied for bad behaviour by regulators, and the dividends paid out to private shareholders.

In 2017, South West Water, owned by the private Pennon Group, was picked out by the Environment Agency as the worst in the industry for pollution. In 2017, the chief executive of Pennon took home £660,000, a 62% increase from 2013, while overseeing 169 separate incidents of sewage spills and pollution that year alone.

On top of this, South West Water is uniquely subsidised by the tax payer. Despite paying out £111.8m in dividends to its private shareholders this year, they have been receiving £50 per customer every year in subsidy from the UK Government since 2013.

Urgent reform is clearly needed, and South West’s proposals appear to be a recognition of the deep failings of the privatised water model and the specific issues faced by South West Water.

The co-operative movement is based on the principle that democratic ownership, which gives customers a stake and a say in how a company is run, and a fairly shared dividend when it makes a profit, is the answer to failing markets and corporate excess.

However, reading the small print in South West Water’s plans, it becomes clear that this stake is little more than a token. The £20 million of accrued benefits from bills over the last five years amount to little more than £25 per household, and come with far fewer rights than private shareholders. The promised vote is not on the finances or behaviour of the company, or on executive pay, and nor will it hold the company board to account or elect members to it – instead it elects members to the pre-existing consultative stakeholder panel.

The Co-operative Party’s suggestions put forward a different model. Instead of being owned by distant shareholders, private companies and overseas governments, water companies would transition to ownership its customers and employees, through democratic trusts which elect board members, have a say on remuneration, agree the company’s audit, and choose how profits are reinvested or redistributed.