The UK’s Great Water Experiment Has Failed

Investors buying a substantial stake in a UK bank must undergo an assessment of whether they have the reputation, integrity and financial soundness to be an owner. A similar process applies to acquirers of oil and gas producers. Even buyers of football clubs face a “fit and proper” test of their suitability. No such requirement applies to the owners of water companies. This never made sense.

Jon Cunliffe, former deputy governor of the Bank of England, seems to agree. A key recommendation of the Independent Water Commission that he chairs is to give a future combined industry regulator the power to block changes of ownership, set leverage levels and, in some circumstances, to give direction to the ultimate controller of the company. Such powers are “necessary guardrails” in water, he said this week, presenting the conclusions of the commission’s 464-page final report. For some critics, its proposed overhaul doesn’t go far enough; all the same, the significance of the shift in regulatory philosophy shouldn’t be underestimated.