Don't blame privatisation for our water crisis

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20-05-2025

There are few things as perfectly emblematic of the United Kingdom's endemic governance crisis than the fact that an island nation with almost 20,000 miles of coastline and 800-to-1200mm average rainfall a year has broadly the same attitude to water as Dune's Fremen.
Water companies are saying that they might need to 'restrict usage' as the combination of a changing climate and a rapidly-expanding population put mounting pressure on Britain's water resources.
But whilst those things might be the proximate cause, the true root of the problem is our usual stubborn resistance to building things – or in this case, to digging some holes in the ground.
Our newest reservoir, Carsington, was opened over three decades ago. Since then, our population has grown by over ten million people; in that same time, our reservoir capacity has not increased by so much as a drop.
Who's to blame? The water companies are easy targets; the Daily Telegraph's own report refers to 'underinvestment in water reservoirs since privatisation' as the root of the problem.
The real picture, however, is quite different. As Robert Colvile of the Centre for Policy Studies has shown, privatisation actually delivered consistently higher investment in water infrastructure than under the nationalised regime, to the extent that we actually invest more in 'repairing and upgrading' our water infrastructure than any European nation.
Why is this? Because rather than having to rely on the Treasury deciding to make unglamorous, long-term investments, water companies are obliged to heavily reinvest revenue in their networks. If you want something properly funded, make sure it isn't competing with pensions and the NHS for cash every year.
Privatisation has also boosted productivity by 64 per cent, according to a report by Frontier Economics, which translates to lower bills. Of course, politicians might have held them even lower had the state retained direct control – but that would have meant less revenue and less investment.
No, the real culprit is planning. Abingdon Reservoir, which when complete will hold 150 million cubic metres of water, was first proposed by Thames Water almost two decades ago. Yet unlike in the golden age of British infrastructure, private companies cannot simply buy land and build things we need. Time and again, the reservoir has been rejected, with a broad swath of England subject to avoidable droughts year after year just to avoid upsetting Vale of White Horse District Council.
Ah, but what about leaks? Surely, we wouldn't need all these reservoirs (read: perfectly pleasant lakes) if we could only fix the leaks? This line is peddled often by local campaigners trying to stop a reservoir, but it is nonsense.
First, it is worth pointing out that the sector's performance on leaks has improved since privatisation; just since 2019, when Ofwat ditched the previous 'sustainable economic level of leakage' (SELL) regime, we have seen a double-digit reduction.
The ideal amount of water lost to leaks would obviously be zero. But that is an impossible – or at least, ruinously expensive – target. Much of Britain's water infrastructure is Victorian; does anybody seriously think it's plausible to dig up and replace every pipe in the nation? We don't even know exactly where they all are.
Moreover, the Victorians were not as exercised as we about leaks for a sensible reason: unlike oil, sewage, or other pollutants, mains water leaks don't damage anything. The water simply returns to the water table. Fixating on leaks is sensible if you're in a water-scarce environment; in the UK, which would have abundant water if it would only dig some holes to store it in, it is a sign of madness.
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