Time to clean up our water
WATeR company bosses – and shareholders – have breathed a sigh of relief that the threat of renationalisation under a Jeremy Corbyn government has been lifted, but they have no room for complacency.
The news that bills will fall by £17 on average this year, according to industry body Water UK, is a step in the right direction, albeit a small one.
But it will not be enough to placate consumers who are angry about high costs, leaks, water quality, pollution and the rewards doled out to executives and investors.
Since privatisation in the late 1980s, the industry has not covered itself in glory.
historically, some companies paid lavish returns to shareholders, made use of offshore tax havens and loaded up with debt, earning themselves near-pariah status.
Regulator Ofwat, which has been accused of soft-pedalling with its charges, seems determined to take a tougher line.
In the summer, it rejected all but three of the leading suppliers’ business plans and in December it announced a new five-year plan under which they will have to cut prices and invest billions to improve their services.
Some large investors protested. But the idea that Ofwat is being too draconian is not borne out by the share prices of the publicly quoted businesses. Severn Trent shares are up nearly 28pc in the past 12 months and have a dividend yield of 3.73pc, while United Utilities is up 20pc and yields 4.22pc. Pennon shares rose 46pc in the past year and have a 3.760pc yield.
Nationalising water is not a solution and would in fact only make matters worse.
Companies would find themselves perennially at the back of the queue for essential money to invest, behind health, education and all the other myriad demands on the government purse.
The problem for the industry, however, is that the public doesn’t see it that way. Opinion polls have suggested there is a majority in favour of taking water back into state hands, which is perhaps not surprising, given some of the abuses that have been on display.
The water companies have had a lucky escape from the clutches of Jeremy Corbyn.
Their bosses should seize upon this as an opportunity to win over its regulator, and even more importantly, a sceptical public.
Sirius woes
SMALL shareholders in Sirius Minerals will soon receive documents setting out details of the takeover by mining giant Anglo American, and then, shortly after, will need to cast their vote.
It is desperately sad that many private investors poured large sums into Sirius and are facing large losses on the Anglo offer of 5.5p a share. Some doubt that this is, indeed, the best offer that could be achieved. It does seem a shame that Anglo, Sirius, JP Morgan and all the other great business brains involved in the deal are not at least able to offer small investors an option that would allow them to share in any upside in the polyhalite mine if it succeeds as promised.
They could buy shares in Anglo, but that would expose them to a huge range of projects of which Sirius is just one. Apparently, producing an instrument linked to the performance of Sirius alone would be too complicated. So small investors are being told there is a stark choice: either back the bid or Sirius is likely to go bust. What a terrible position to be in after such high hopes.
White’s warning
NO NeW chairman wants to start the job with a warning of closures and job losses, but that has been the reality for Sharon White, who has taken over this week at ailing John Lewis.
It is suffering some common problems, such as whopping business rates, but, critically, the department store group is losing its reputation for impeccable service.
Last year, it spent £23m on payments to placate customers whose orders had been mucked up. White believes if it can win back big spending shoppers who have defected, profits will rebound by £100m.
She is right to focus on service as it is the whole reason people go to John Lewis – for the knowledgeable staff and the assurance if something goes wrong, it will be sorted out. That is hard to maintain, however, when morale has been undermined because bonuses and jobs are under threat.
Accountancy firm BDO says an end to the Brexit deadlock has contributed to a pickup in sales on the high Street last month. A Boris bounce can’t come soon enough for John Lewis.