Water bosses need to start thinking of customers, not just themselves
May 2025, Thames Water chairman Sir Adrian Montague gives evidence
4 min read
“We have created incentives to try to retain our most precious resource, which is our senior management team.”
If you wanted to give a damning example of the corporate culture in the water industry in the UK today, you really could not ask for much better than this quote from Sir Adrian Montague, the chairman of Thames Water. He gave that answer quite happily in recent evidence to the Environment, Food and Rural Affairs Committee, which I chair, as we progress our inquiry into the state of the water industry.
Whether politicians or the public, we are all pretty well-versed these days in the mess that is the UK water market. Given what you often hear from wild swimmers about the current state of the seas and rivers that they swim in, the thought of a “deep dive” into the UK water sector might sound less than attractive – but this is what our committee has undertaken to do.
What we have found is a massive failure of regulation and far too many competing interests
What we have found is a massive failure of regulation, with a regulator in Ofwat focused on process rather than outcome, and far too many competing interests. Bolstering the water watchdog is part of the task ahead, but there is only so much you can do by pulling the levers of regulation. More difficult – but equally important – is the question of how we change the culture within the industry that has led to the sort of attitude quoted above.
Over the last five months, we have taken evidence from the heads of all the major water and sewerage companies. Ten CEOs and six CFOs have answered questions on everything from delivery of essential services to customers, their record on polluting watercourses with untreated sewage, their financial structures and debt ratios, their dividend payments to shareholders and, of course, their payout of bonuses to themselves.
We have learnt quite a lot about the state the water sector in the UK is in today. Not all of what we have learnt, I suspect, is quite what the bosses wanted us to come away with. Our sessions suggest that the culture and the priorities at the heart of the sector are a big part of the problem.
Our efforts to get a better understanding of the water companies’ financial structures revealed just how intentionally impenetrable these companies are, with their myriad subsidiaries, holding companies and parent organisations. One water company, it emerged through a rather tedious and labyrinthine exchange, has not one but 14 companies within its group.
The sheer complexity and obfuscatory nature of these structures suggests that their purpose is less to provide a good service to customers than to allow water companies to juggle their finances and their debts. It should be no surprise, therefore, that the priority of providing a decent service to customers has rather gone missing along the way – and nowhere is that more apparent than at the top of the corporate ladder.
While the committee has been at work scrutinising the state of play “as is” in the water sector, Sir Jon Cunliffe has been charged with the task of recommending to the government where we go from here, through his independent commission into the water sector.
Sir Jon’s task is enormous, and even if we assume a degree of political will from the government to support him, it is not one that anyone would envy. What we can say based on our findings so far, however, is that the regulations and recommendations that Sir Jon is going to set out will only take us so far if reshaping corporate culture is not placed front and centre.
The committee will set out our own findings in a report in June. I hope that it will be a spur not just to the government to regulate better but also to the industry to rethink its priorities. Perhaps then we can guide water company senior management to have a little less regard for themselves, and a little more regard for that “most precious resource” – our water supplies.
Alistair Carmichael, Lib Dem MP for Orkney and Shetland, and chair of the Environment, Food and Rural Affairs Select Committee
