The financial costs of the privatised water and sewerage companies of England and Wales averaged 35% of company revenue from customer bills in 2023-24
o These costs are the return on capital to private shareholders and the interest (and index-linking) on the bonds and loans from creditors
o These financial costs mean that over one-third of customer bills pass straight through the companies without being used for water and sewerage services
o All companies have high finance costs, including Welsh Water: despite being owned by a \u2018non-profit\u2019 company, it loses 41% of bills to finance costs \u2013 the same as Thames Water
\u2022 By contrast, the financial costs of publicly owned Scottish Water represented only 8% of revenue in 2023-24: less than a quarter of the costs in England and Wales
o This is partly due to not having to pay dividends to private shareholders
o Scottish Water has also taken on far less debt than the E&W companies
\u2022 Scottish Water has on average invested about \u00a3180 per household per year since 2022 \u2013 about 50% more than the average in England and Wales over the same period, which is about \u00a3120.
\u2022 The high financial costs of the private companies are reinforced by the regulatory system. Almost half of the 35% price increase planned by OFWAT for the next 5 years 2025-30 is based on doubling the return on capital\/financial costs, from \u00a311.1bn in 2019-24 to \u00a322bn. in 2025-30
o OFWAT\u2019s price decisions represent the largest real price rises in any 5-year period since privatisation. Prices in 2030 will be double, in real terms, what they were at privatisation
\u2022 OFWAT assumes that the companies will pay off none of their existing debts over the next 5 years \u2013 they are expected to replace expiring debt with new, more expensive debt, which will increase financing costs \u2013 as well as taking on further debt.
\u2022 Under any assumption about compensation levels, taking the English and Welsh water companies into public ownership could save \u00a33bn-\u00a35bn in annual financing costs. This could increase new investment, or reduce the average annual water bill by \u00a3100-\u00a3160 per annum.<\/p>\n\n\n