The water industry is in crisis. Can it be fixed?

As a result of all this, there is a widespread belief among the public that investors and executives have sucked out money in dividends and pay that should have been invested in improving water firms’ infrastructure. The Liberal Democrats capitalised on this perception during this year’s general election, gaining dozens of seats after making the state of the reform of the industry one of their key campaign pledges.

According to Ofwat, water companies have paid out £52bn in dividends (£78bn in today’s money) since 1990. Many feel that was money that could have been spent helping to prevent sewage spills rather than ending up in investors pockets.

But over the same time frame water companies have invested £236bn, according to Water UK, external, which represents the sector.

Last year, it adds, the England and Wales water sector invested £9.2bn, which it says is the highest capital investment ever in a single year.

And it’s important to note that not all water companies are the same.

A few are well run, have manageable debts and have invested steadily in their infrastructure over the three decades since privatisation, while delivering dividends to the shareholders who have provided the capital required by a privatised model.

Regardless, lenders are now demanding higher rates from other water companies, too, as the whole sector appears a riskier bet.

The regulator Ofwat allowed this increase in debt to happen as for many years it did not consider that it had the requisite powers to dictate how companies chose to structure their finances.