Media Release

Water nationalisation would cost £90 billion

Nationalising the water industry could cost taxpayers £90 billion, equal to the entire education budget or twice the annual NHS wage bill.

The figure, which would be more than a tenth of all annual Government spending, has been calculated by the Social Market Foundation.

The cross-party think-tank estimated the potential costs of nationalisation at the request of the water industry, compiling and publishing its estimates independently.

The SMF calculated that a Government that chose to buy the English water industry at fair market prices would pay between £87 billion and £90 billion to acquire water firms currently owned by shareholders and investors including pension funds.
Funding such purchases with borrowed money would add 5% to the national debt.

To put spending of £90 billion in context:
–  Total managed expenditure for the Department for Education in 2017/18 is set at £86.3 billion
–  Department of Health spending on NHS wages in 2015/16 was £48.7 billion.
–  The total income tax take for 2017/18 is expected to be £175 billion.
–  Total Government spending in 2018/19 is expected to be around £809 billion.

The SMF calculation of £87 – £90 billion is a “takeover price” based on an assessment of company accounts and following valuation methods used by investment banks and fund managers.

The think-tank also considered options for nationalisation where a Government forced through a sale for lower prices. That would reduce up-front costs to taxpayers, but would cost the UK economy money in the longer term as investors in other sectors either deserted Britain or demanded a risk premium to invest here.

Buying water companies below their takeover price would also leave current owners out of pocket.
Those owners who lost out would include UK pension funds, which are significant investors in the water industry (see note 1) and water industry workers (see note 2).

By taking ownership of the water industry, the Government would acquire companies that are currently profitable, and future profits would be weighed against the immediate purchase price.

However, future profits depend on investment in water piping and other infrastructure, costs that would then fall on the Government. The SMF calculated that meeting the water industry’s current plans for investment would mean spending more than £100 billion (in current prices) by 2040.

That would mean that the Government was spending more than 13% of its entire capital spending budget on water infrastructure, the SMF calculated. For comparison, building and maintaining schools and other educational facilities would absorb 18% of the capital budget.

Given continuing political pressure for more spending in areas like healthcare, education and transport infrastructure, and ongoing pressure on the public finances, the SMF concluded there would a risk that the nationalised water industry would not receive the capital spending needed to remain profitable.

“Any underinvestment could ultimately lead to notably weaker productivity growth in the water industry in the long-run, which could lead to higher consumer prices further ahead,” the report said.

The SMF also considered alternative forms of public ownership for a nationalised water industry, including mutualisation – where companies would be owned by newly created companies.

Such an option would still require a forced sale just as with a direct nationalisation, either at the “takeover price” of up to £90 billion, or at a below-market valuation that would risk deterring investors. The only significant difference from nationalisation would be that new debts might not be added to the Government balance sheet, but only if the Government did not exert direct control over the new firms, something that might defeat the purpose of ending private ownership.

Scott Corfe, SMF chief economist said:

James Kirkup, SMF director said:

“Taking ownership of water companies would mean taxpayers owned firms that are currently profitable, but maintaining those profits would require significant sums of public money to be spent on capital investment.

“Would ministers thinking about re-election chose to spend up to £100 billion of scarce public money on water infrastructure, or divert the money to other priorities such as the NHS?”

“This study makes no comment whether the policy of water nationalisation is a good or bad idea, but simply sets out the likely costs of that policy. Equipped with this information, it is up to voters and politicians to decide whether those costs are a price worth paying.”


About this report:

The SMF report was commissioned by a group of water companies: United Utilities, Anglian Water, Severn Trent and South West Water. The SMF made its calculations independently using publicly-available data and retained full editorial control of its report. The SMF report makes no comment on whether nationalising the English water industry should or should not be carried out. It offers a technical evaluation of the direct and indirect costs of taking water companies into public ownership.
The lead author is SMF Chief Economist Scott Corfe, formerly senior economist at the Centre for Economics and Business Research.


About the SMF:
The SMF is a cross-party think-tank that works for fair markets. We are a registered charity. Chaired by Mary Ann Sieghart, our board of trustees includes Tessa Jowell, a Labour peer, and Gillian Shephard, a Conservative peer. The SMF has no party-political affiliation, working with politicians of all parties who support sensible, practical policies that will make Britain’s economy and society more fair and more dynamic.


Contact: Please call the SMF Office on 020 7222 7060 or email James Kirkup on



  1. Dalmore Capital and GLIL Infrastructure LLP, a joint venture between Lancashire, Merseyside, West Yorkshire, London, and Greater Manchester local government pension schemes, owns 15% of Anglian Water. The BT pension scheme owns a 13% share in Kemble Water Holdings, Limited which owns Thames Water. Around three quarters of United Utilities shares are held by institutional investors – such as pension funds. Approximately half of the institutional investors are UK-based.
  2. Employee share ownership is common in the water industry:  70% of Severn Trent’s UK employees participate in share schemes, two-thirds of South West Water’s  and a third of United Utilities staff.


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