‘Moving Thames Water into a co-operative could save the failing utility’

The government should consider moving Thames Water into the ownership of its customers instead of institutions such as overseas pension and sovereign wealth funds, according to the leader of the UK’s co-operatives movement.
Rose Marley, chief executive of Co-operatives UK, said: “If Thames Water was owned and controlled by the people that drank from it and swam in it, would they pump sewage into it?”
Thames Water is heavily indebted and risks being nationalised but co-operative or mutual ownership has not previously been presented as a potential solution to the crisis.
Writing in The Times, Marley questioned why “privatisation or nationalisation” are the only options being discussed as things go wrong and “mutualisation is rarely presented as a solution”.
Mutual ownership sees organisations owned and controlled by members, who can include customers, employees, local communities or a combination of these. But given the scale and complexity of Thames Water’s indebtedness, turning the business into a mutual would be extremely expensive and involve clearing significant practical obstacles.
A potential government bailout to nationalise the business is expected to cost about £10 billion, which is likely to be passed on to customers across the country in the form of higher bills.
Rather than winding up the business and paying off creditors, a so-called special administration regime is a possibility, which could allow Thames Water to enter the insolvency process, have its debt restructured and then exit as a “going concern” operation. Creditors are against this option as they fear losses and argue that it would deter overseas investment.
A group of Thames’s creditors, who have lent the heavily indebted utility about £10 billion, are working on their own rescue plan for the company, in the belief that the company’s own turnaround efforts are unlikely to succeed.
The crisis is being closely watched by international investors as a test case for how the UK approaches such assets amid fears a disorderly resolution could have a knock-on effect for other utilities.
Thames Water has spoken to Brookfield Infrastructure Partners and Global Infrastructure Partners, the investment giants, about a potential £3.3 billion emergency fundraising, The Sunday Times reported this week.
Ofwat will not rule until December on how much Thames is allowed to increase its bills by, and how much it can spend on upgrading its network, over the next five years. Indications from the regulator that Thames Water will have to cut its spending plans risk preventing the “turnaround and recovery” of the business, the utility warned last month.
Utility companies are facing fierce criticism over sewage spills that are polluting the country’s waterways, which have drawn attention to the industry’s ageing infrastructure.
Thames Water’s crisis is seen as emblematic of broader mismanagement of the industry, with growing anger over the dividends enjoyed by the owners of Britain’s water utilities since privatisation, as well as the debts that have been piled on these businesses and their poor performance.
Writing in The Times, Marley said the company’s woes were an example of “extreme failure of regulation and corporate governance” and “values, including honesty and social responsibility” had been missing from its decision-making.
Co-operative and Mutual Economy, a report from Co-operatives UK, a group that represents member-owned businesses, said that the sector generates £167 billion for the UK economy and employs more than 1.3 million people, with examples including supermarkets, farms, football clubs, housing associations and insurers.
“These businesses are proven to be more resilient, more productive and, most importantly, they keep their profits in the UK. They are not distributed to distant shareholders, but to the members…This is great for our our local communities and economic wealth,” Marley said.
Thames Water was approached for comment.
Allow me to pose a question in good faith. If Thames Water was owned and controlled by the people that drank from its waters and swam in them, would they pump sewage into its watercourses? If the people that ran the Post Office had a stake and say in how it was managed, would they have prosecuted hundreds of their own postmasters and postmistresses over the Horizon computer system?
Of course, these are two examples that reflect extreme failures of regulation and corporate governance. Values, including honesty and social responsibility, simply don’t appear to have featured in the decision-making. Is there a different way? I’d argue there’s an inherent link between company ownership and outcomes. It is 180 years since the Rochdale Pioneers laid the foundation for what is now a global co-operative movement. There’s a reason why co-operatives and mutuals continue to demonstrate a fairer, equitable, sustainable and more desirable way to run a business.
And yet, mutualisation is rarely presented as a solution. When things go wrong, why is that we discuss only privatisation or nationalisation? Why is there seldom any dialogue around allowing people — the customers, the community, the local infrastructure — to participate in ownership and decision-making? And why not unlock some untapped community capital in the process?
Our Co-operative and Mutual Economy 2024 report, published today, reveals that the sector generates £166.7 billion for the economy and employs more than 1.3million people. The sector is made up of supermarkets, football clubs, housing associations, insurers, tech companies, farms and solar farms. From the small “saved” community halls, pubs and cinemas to big names such as Nationwide, John Lewis and Arla, they all have one thing in common: they are owned and, in the case of co-operatives controlled, by their members — the people that generate the trade; the workers, the tenants, the customers, the fans.
These businesses are proven to be more resilient, more productive and, most importantly, they keep their profits in the UK. They are not distributed to distant shareholders, but to the members, which also means the money tends to be retained within a ten-mile radius of where it was generated. This is great for our our local communities and economic wealth.
Of course, I understand the model doesn’t work for everyone. I often ask businesses who are exploring co-operative options, why they think it’s suitable for them. Democratic business is not for the feint-hearted.
The good news is that the government has pledged to double the size of the co-operative and mutual sector. It must at least be an option. It is vital that we are able to encourage more people, companies and communities that wish to go on this journey. We need solutions from a policy and financial perspective to make this happen.
The UK’s 9,000 co-operatives and mutuals represent less than 1 per cent of all UK business. Imagine the economic and social impact of doubling that; providing new solutions to problems in our country’s infrastructure across energy, water, transport, broadband and maybe even the national broadcaster?
If it’s owned by you, surely it’ll “do right by you” as one major co-op retailer recently declared. If it does right by you, that means we’ll see inclusive growth and a much needed new way of thinking about how we can work together as a nation. That’s people, business and government working together to produce better outcomes for all.