What one British Water Utility Can Tell Us about Climate Adaptation to Water Shortages and Drought

Now Britain is officially in drought, its privatised water utilities are attracting more attention than usual.

• We won’t repeat here the re-ignited debate over the cost/benefits of privatisation.
• No need to harp on about the decades of infrastructure neglect while corporate profits and dividends soared.
• Nor the vast quantities of water gushing from unfixed leaks while PR people explain why the public need to do their bit by complying with hosepipe bans to fight water shortages.
• There are plenty of people pointing out that water companies appear to regard the wrist-slapping fines for pumping untreated sewage into the sea as a standard business cost.

Instead, this article looks at the story behind one of the UK’s water monopolies, the reassuringly-local sounding Wessex Water. We’ll tell you things you almost certainly didn’t know, and ask what they tell us about how we adapt to climate change.

Wessex Water supplies the South West of England with its drinking water, and treats its wastewater.

Wessex Water vans are a common sight on West Country roads. Wessex Water bills land on the doormats of every West Country household. Every now and then, when works are done or a main bursts, Wessex Water notices are pushed through West Country letterboxes.

Always, in smaller font beside all the Wessex Water logos, are the words ‘YTL Group’.

What is ‘YTL’?

A brief diversion into post-WW2 Asian economic history, but you’ll see the point in the end.

Former Asian colonies, liberated after WW2, wasted no time in kickstarting their own industrial revolutions. They rapidly chased down the 100-year+ head start enjoyed by their former rulers. 

Without much of a middle-class between the elite and the peasantry, there were plenty of opportunities for uneducated, street-smart entrepreneurs to make a killing.

Whatever business they started in – chickens, shoes, bicycles – many street-smart traders thrived. Many of them soon turned to property, turning their small fortunes into large fortunes. 

Either way, they spared no expense in educating their children.

A pattern emerged. The founding patriarches of Asia’s Industrial Big Boys (they were nearly all boys) died or retired to proudly hand over the reins to their MBA-laden progeny. These were nearly always sons, usually the first-born.

These sons had been to top Ivy League and Russell Group universities, where they’d been taught the 1980s and 1990s MBA gospel of Go Global, My Son, and Diversify.  Their academic tutors watched these Asian graduates return home to run the family business, put their mantras into practice, and smoothly enter the global billionaire class.

What Does This Have To Do With Wessex Water?

Look up YTL on Wikipedia, and here’s what you’ll learn. 

• 1929: Yeoh Tiong Lay was born into a modest Chinese-Malaysian family, going straight from secondary school to building site.
• 1955:  Yeoh Tiong Lay founded a small construction company named after his initials
• 1960s/70s/80s YTL grew into the Malaysia’s dominant property empire
• 1988: Yeoh Tiong Lay hands control to first-born son Francis (Nottingham Uni)
• 2021: YTL is now a global infrastructure conglomerate with US$4 billion in revenues (70% from overseas), a market capitalization of US$7 billion, total assets of US$18billion including cash reserves of US$3 billion, serving 12 million customers over 3 continents.

So YTL Group’s key businesses include: 

• Utilities
• operating and maintenance activities
• high-speed rail
• cement manufacturing
• construction contracting
• property development
• hotels & resorts
• technology incubation
• real estate investment trust and carbon consulting.

In other words, a classic case of the multi-generational, post-colonial Asian entrepreneur rags-to-riches story we just outlined in our diversion.

A Malaysian-Based Multinational Owns a UK Water Utility –  So What?

This is the really important question.

Britain has been uniquely relaxed among developed nations in its laissez-faire attitude to foreign ownership of critical infrastructure. What’s now called our water ‘industry’ (‘utility’ appears to have sounded too seditious to the proselytisers of privatisation, and appears to be obsolete), is now 71% foreign-owned.

In addition to YTL’s 100% stake in Wessex Water, 80% of Northumbrian Water belongs to Cheung Kong, run by a Hong Kong refugee/plastics/property/firstborn son of the founder, who attended Stanford Uni/took over in 2018. Cheung Kong is now worth $100Bn and is registered in the Cayman Islands.

It’s not just Asians in on the act. 

• Yorkshire Water is owned by by a Jersey-based private equity company called Kelda Group, whose investors are believed to include Citibank and HSBC Holdings.  
• 40% of Southern Water is owned by JP Morgan.
• Then there’s Britain’s electricity sector, nearly 90% foreign owned, with similar stories in transport, telecommunications, renewable energy and many other sectors.

Since the 80s, when Thatcher’s Conservative Party privatised so much of the public sector, British governments have followed suit ever since. If you believe market forces trump every other consideration, you believe that private ownership is more efficient than public ownership.

Lefties might frown at that, but banning foreign ownership smells xenophobic. Besides, re-nationalising public utilities means borrowing huge sums of money to reimburse the shareholders.  

Until very recently, with power companies going bankrupt, and rail franchises failing to fulfil their contractual obligations, neither Right nor Left have been keen to wave the banner of re-nationalisation. 

There’s been an apparent consensus that Britain has benefited from letting the Invisible Hand of the free market conjure its magic, while former EU partners remain stuck in their socialist mud. The rest of Europe had seen nothing wrong with persisting with state ownership of utilities. Their governments own or subsidise critical services like water, transport and power.

Climate Emergency – A Game Changer?

The Climate Emergency is making Britain re-examine this narrative. Every drought, hosepipe ban, water shortage, flood and heatwave now mean another dot joined up.

Forget whether they’re private corporations or foreigners, are owners such as YTL more likely to help or hinder the UK, or any of the many other countries in which they operate, in reaching its carbon drawdown goals?

Such questions go beyond national boundaries, let alone regional ones, and are now being debated by British politicians. They have no choice, as so many privatised utilities are going bust. Water, power and transport are essential services. Unless someone does something, people may die.

Will Britain and other countries who’ve put their faith in the hidden hand of market forces, reconsider whether such necessities are best entrusted to private companies?

Here’s one peculiarity of YTL to consider. Like many overseas owners, its UK water monopoly is not only one of many utilities it owns, but utilities is one of many business sectors in which it operates.  

Imagine a YTL board meeting, with representatives from each of the holding company’s major businesses sitting round a table. Each is trying to convince the second-generation MBA firstborn at the top of the table to decide where to invest his multi-billion dollars of assets.

There’ll be someone from YTL Cement, representing the world’s most CO2-intensive industry. 

There’ll be someone from YTL Carbon Consulting, whose main activities are getting Asian plantations to grow biofuel, gaming the carbon tax credit system, and reducing agricultural emissions.

What kind of questions will they be asking around their boardroom table? What trade-offs will they be weighing? What regulations should they be factoring in?  

Some suggested questions, for them, Britain and every country as it works out how to adapt their utilities to our changing climate:

• How much money does each business make for YTL?
• How much weight does the board, who control Wessex Water, consequently place on urgent and drastic carbon reduction? 
• And would that weight be more, or less, were Wessex Water publicly owned?

*This is an edited version of this longer article about water shortages

that appeared in 2021.