The neoliberal obsession with privatizing essential industries and services is haunting the UK. Profiteering by gas, oil, railways, mail, and other entities is the root cause of the current high inflation and misery for millions. The water industry has been hoisted by its own profiteering, and Thames Water, England’s largest water and sewage business, is teetering on the edge.

The seeds of destruction were sown by the 1989 privatization. The government sold water entities in England and Wales for a meagre £6.1 billion. In the absence of parallel water and sewage pipes, competition isn’t possible, and companies have captive customers.

The industry has adopted the classic private equity business model. Its key elements are high prices, low investment, and financial engineering to extract high returns. Instead of shareholders making long-term investment through equity, the business model uses debt because interest payments qualify for tax relief — effectively a public subsidy. This reduces the cost of capital and increases returns to shareholders, but also increases vulnerability to interest rate hikes.