Football fans and water customers can't quit – they need extra protection
3 min read
Ownership matters, particularly in monopolistic markets. I should know as the town I represent, Reading, has become the epicentre for two of the most telling examples of this problem.
The 16 million customers of Thames Water, including my constituents, have no choice other than Thames Water. And while some football fans do switch clubs when their team is losing, they were arguably not fans in the first place at all. True Reading FC fans had no choice other than to stay and fight when the future of their club was at risk over the last couple of years – because nothing could have replaced it.
Economics teaches us about the dangers of monopolies, or markets with an absence of exit for fans and customers. The typical government response to this is to create a regulator – but that doesn’t necessarily put power back in the hands of customers. We have already seen many instances where these bodies fail to effectively rebalance the market.
Football industry associations and water regulators have attempted to punish bad governance in the past. But they have been toothless. The English Football League (EFL) has tried to penalise poor management by docking points, for example, for late payment of wages. Reading had 18 points deducted over four seasons before the former owner Dai Yongge finally sold.
Such penalties didn’t directly affect the club’s absent owner, and angered fans. I am not an EFL hater: the association simply lacked the legal tools to curb bad behaviour. An independent football regulator will have more effective tools through a licensing regime. In water regulation, too, customers need reassurance that they will not end up paying the fines for illegal sewage dumping by their water companies – something that this government is putting into law.
Notably, there is much more opportunity for exit for shareholders than stakeholders: over the past two decades, US private equity firms have bought up stakes in football clubs and water companies. Ares Management, for instance, has invested in Chelsea FC as well as owning debt in Southern Water; Elliott Management, after fighting a legal battle over its sale of Italian football club AC Milan, is reported to be readying lawyers over its Thames Water debt. And yes, given their many tentacles, there’s even one company that links these two funds: Macquarie, the Australian investment bank, who gradually sold Thames Water to a consortium of funds, and now controls Southern Water.
Our government has recently announced plans to set up a desperately needed water ombudsman to be the UK’s first champion for water customers – something that should’ve been set up decades ago after privatisation. The Consumer Council for Water, a voluntary body, did not have the right tools for the job, and Ofwat was focused on prices rather than all the aspects of service that affect consumers.
My constituents are now facing upwards of 30 per cent increases in their Thames Water bills, yet are flabbergasted by the ongoing payment of bonuses to executives, something that 27 Labour MPs and I have called on the company to stop. We now have to move quickly to get a true consumer champion in place.
Similarly, there is little time to waste in setting up the Independent Football Regulator, the first UK industry regulator with the power to curb bad owners. While we were thankfully rescued by Reading’s sale in May, fans of Sheffield Wednesday are now riding the same emotional rollercoaster, not knowing if their club has a future.
The status quo is not working, in water or in football: we need industry regulators to stand up for loyal fans and captive customers.
Yuan Yang is Labour MP for Earley and Woodley
