MARLBOROUGH, England — After years of illegal polluting by Britain's water industry, an independent report planned for release in the coming days could lead to tightened regulation while also prompting an expensive modernization drive.
The report, led by a former deputy governor of the Bank of England, Jon Cunliffe, was commissioned by Prime Minister Keir Starmer's government last year, after at least a decade of calls from environmental activists who have demanded an end to illegal polluting of the United Kingdom's waterways. The rivers in England's "green and pleasant land," to quote a famous hymn, have in recent years often run brown and dirty due to widespread and frequent sewage discharges by some of the nation's largest private water companies.
That was visible on a recent visit to the tranquil banks of the River Kennet near a historical rural market town called Marlborough, in the county of Wiltshire, about two hours west of London. Humans have lived in the fertile valley of the River Kennet for thousands of years, and today, so does James Wallace, the chief executive of the advocacy group River Action.
After making his way through some leafy undergrowth to what he says was once a cherished family swimming spot on the Kennet, he pauses as a flock of ducks flies low overhead. "It is beautiful," Wallace says, as he nears the river's muddy banks. "But as we step towards the water edge, we can see this carpet going along the bottom of algae, which is snuffing out the opportunity for life."
In the minutes he stood there speaking, there was no sign of any fish in a river long known for its brown and rainbow trout, something Wallace attributed to a single cause. "On the surface, we see a vibrant, healthy habitat, and beneath we see a dead one, and that is because of sewage pollution," he said.
Wallace says protected natural environments, like the Kennet, are being "trashed by corporate profits." He points out a sewage treatment plant several miles upriver. It is operated by Thames Water, Britain's largest private water company, which has become nationally notorious for its untreated sewage discharges, mounting debts and substantial dividend payouts.
A history of paying fines for polluting
In May, Thames Water was fined more than $165 million by Britain's water regulator, known as Ofwat, for discharging untreated sewage into rivers without sufficient explanation. It was separately fined for paying hefty but unjustified dividends to its shareholders.
Reacting to the verdict, the company said in a statement: "We take our responsibility towards the environment very seriously and note that Ofwat acknowledges we have already made progress to address issues raised in the investigation relating to storm overflows."
Behind a green metal gate, the facility in Marlborough, like many elsewhere in Britain, today has to service a larger population and changing rainfall patterns thanks to climate change, Wallace acknowledges. But he says spending to upgrade infrastructure or build new facilities like this has failed to keep pace with those changing requirements.
"The system was designed to cope with it years ago, but not now, because of a lack of investment across the industry ... the whole of Britain is exposed to a serious crisis in water pollution," he says.
That crisis is systemic, experts warn, and the stench of sewage in popular swimming spots has repeatedly ignited public outrage, prompting political recriminations while also casting a harsh spotlight on the nation's regulatory system. Several high-profile incidents have helped underline that Britain's Victorian-era water system, privatized by former Prime Minister Margaret Thatcher in the late 1980s, is largely struggling to serve the population of modern Britain.
Ofwat, the water regulator, has historically prioritized low bills since privatization, according to Bertie Wnek, an infrastructure expert at Public First, a British policy consultancy. That prevented private businesses with local water monopolies from expanding their revenues by unilaterally raising prices. As a consequence, Wnek says, companies were instead encouraged to borrow heavily in order to invest in any new infrastructure, or to generate any substantial profits.
"What we have is a situation where companies have been kind of incentivized to bring on a load of debt onto the system over time," Wnek says. "We're sort of paying the price for that behavior."
Hugo Tagholm, U.K. executive director of the nonprofit Oceana, calls this behavior a "financial scandal," and criticizes companies like Thames Water for extracting tens of billions from the industry, while failing to invest sufficiently in their water pipes and treatment works. "This is something that's enraged the public," says Tagholm, a sea swimmer and surfer who once led a high-profile campaign group called Surfers against Sewage. "The system needs massive investment, and that really should come from shareholders, rather than the customer."
But water companies and their representatives say there are no simple solutions to this complex problem.
Some hope Cunliffe's report will address long-standing complaints about unequal regulatory measures, and restrictions on pricing that have hindered the construction of expensive new water infrastructure.
"The way to get investment is through clear regulation, strong steers from governments and a system that brings in the finance and the investment projects that upgrade those networks and increase our supply," says Jeevan Jones, chief economist at Water UK, the water industry's main British trade group. "The water industry's been really, really clear that what this sector needs is investment, and that investment will unlock upgrades."
Cunliffe's review is expected to propose several comprehensive changes that would focus on strategic planning, legislative reform, regulatory oversight, and reducing the debt loads on existing water infrastructure and assets.
Stop short of nationalization
But based on his interim findings, published earlier in the summer, Cunliffe seems unlikely to advocate a renationalization of the industry, as Starmer's Labour government is pursuing with Britain's railways, for instance. One potential change could lead to a more supervisory style of regulation, where Ofwat or its equivalent focuses more on the specific challenges individual water companies are facing — aging pipes, say, or not enough reservoirs — rather than just a form of benchmarking that makes little sense in a nation where each region — and thus private water monopoly — faces different water-related challenges.
Bhikhu Samat, a legal director specializing in water regulations at the law firm Shakespeare Martineau, believes such a reset should have taken place earlier, and that longer-term investors — like pension funds, rather than the private equity firms and commercial banks that have grown increasingly prevalent in Britain's water industry — would help build longer-term financial resilience too.
"It's really a great way for us as a nation to look at what our goals are with water scarcity and climate change impacting us hugely," Samat says of Cunliffe's forthcoming report on the industry. "The reset is well overdue, and fundamentally, when the final report comes out, one hopes that the recommendations will be implemented wholesale."
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