Andy Burnham and Public Ownership of Utilities

It was Monday 20 July and Burnham strode out in front of Number 10 Downing Street to outline the need for a “circuit breaker for Britain” that would be “a new economic model”. This new model would “put life’s essentials back under public control, making them affordable to you again”, he said.

Gone was the relaxed t-shirt ‘vibe’ that symbolised his tenure as the Mayor of Manchester. The cool and casual look was replaced with a smart but serious-looking suit and tie.

Those who have followed the new PM’s career won’t be surprised by his interventionist overtures. He regularly advocates for bringing essential public utilities, like water and energy, under stronger public control, citing a broken private model where “shareholders never lose and bill-payers never win”.

His approach appears to be a mix of targeted direct ownership, such as supporting public control for debt-ridden Thames Water, and a decentralised, franchise-style regional oversight, modelled on Greater Manchester’s public bus system, the Bee Network.

In an attempt to figure out Burnham’s potential next moves, we’ve looked at some of the highs and lows of government privatisation in the UK, as well as the various ownership models for public utilities around the world.

Water Ratings

UK water companies face intense regulatory and public scrutiny over poor environmental performance, with widespread sewage discharges damaging local rivers, lakes, and coastal bathing waters. Regulatory assessments by agencies like the Environment Agency score companies using a 4-star rating system based on pollution and infrastructure compliance.

Only a small minority of firms achieve top marks, with Severn Trent Water frequently securing the sole 4-star rating for industry-leading environmental management.

Most regional providers, including Anglian Water, South West Water, Southern Water, and Yorkshire Water, sit in the 2-star or 3-star brackets due to persistent operational failures.

Thames Water, the largest UK provider, has repeatedly hit the bottom 1-star tier amid mounting pollution incidents and infrastructure delays.

However, there are also huge differences in water company performance between rivers and coastal areas, where long-term improvements in coastal bathing waters have contrasted with severe, ongoing pollution strains in inland rivers.

Coastal bathing sites generally show high compliance with environmental standards (over 98% meeting minimum standards compared to as low as 29% in the 1990s) because they face intense public scrutiny and strict legal testing during the summer bathing season.

This contrasts with rivers, which suffer significantly higher volumes of untreated sewage discharges and storm overflow events because they lack the high-profile legal protections and fast dilution mechanics of coastal zones.

Coastal water quality is routinely sampled for public health and tourism, whereas many inland river networks experience chronic under-monitoring and heavier pollutant accumulation from agricultural run-off alongside wastewater.

Taking Ownership

If Burnham is to change how Britain owns and runs public utilities, he may be looking at how others do it. Global utility ownership models tend to vary, from public to private structures, primarily categorised into investor-owned utilities, state-owned enterprises, and municipal or cooperative systems.

1) Public and State Ownership Models

State-Owned Enterprises are fully owned and operated by central or national governments, such as Eskom in South Africa, Scottish Water and Électricité de France (EDF).

At the local level, there are municipal or local government utilities, which are owned by city councils or local government bodies to provide direct public services like water, gas, or local electricity distribution, such as Robin Hood Energy (run by Nottingham City Council), Bristol Energy (run by Bristol City Council), and Northern Ireland Water (owned by the NI government).

2) Private and Investor-Owned Models

Investor-owned utilities are privately owned, publicly traded or closely held corporations that operate for profit under strict regulatory oversight. They are prevalent in the US energy sector, such as Duke Energy and NextEra Energy. Further international examples include Enel in Italy and Iberdrola in Spain. In the UK, many of these models were formed from the privatisation of former state monopolies, like British Gas and British Telecom.

3) Cooperative and Community Models

These are non-profit corporations owned directly by the consumer members they serve and are frequently found in rural or remote regions, such as: Co-op Energy, which supplies green electricity and gas via a partnership with Octopus Energy; South East London Community Energy, a community benefit society operating across Greenwich and Lewisham to install solar energy; and Baywind Energy Co-operative, a community-owned wind farm co-operative in Cumbria allowing local members to own and manage renewable generation capacity.

Similarly, mutual ownership/consumer trusts are non-profit or user-governed structures where surplus revenues are reinvested into service quality or lowering consumer tariffs rather than being distributed to external shareholders. They include Vector Limited, a New Zealand energy infrastructure company majority-owned (72%) by a consumer trust that represents local electricity customers; and EA (Electricity Ashburton) Networks, a cooperative electricity distribution business owned directly by its consumer-members on a one-person, one-vote basis.

4) Hybrid and Public-Private Partnership (PPP) Models

These can take many forms, including operating a concession model where governments retain ownership of physical infrastructure assets while a private company finances, maintains, and operates the system for a set timeframe. Cities like Paris have historically granted long-term management concessions to private operators, like Veolia and Suez, before shifting operations back to public control.

Many municipal systems in countries like Colombia and Mexico utilise mixed-ownership or distinct concession agreements, where private firms operate public water delivery assets.

This allows the public authority or local municipality to keep the legal ownership of all physical fixed assets and plants. The private concessionaire collects revenue directly from consumers, absorbing the financial risk if operating costs or demand fall short. At the end of the contract term, all infrastructure, improvements, and operations revert fully to the government or council.

The lease/affermage is another ownership model that seems to be popular in some emerging markets, where private operators run the utility and collect consumer tariffs while paying a lease fee to the state, which retains responsibility for major capital investments. Senegal Water Supply was an example of a long-running affermage contract (1996–2019) where a private operator managed water delivery and network maintenance across Dakar and urban areas while the state-owned asset company retained infrastructure ownership.

National v Devolved

If Burnham’s government is to follow through with his promises to exert greater public control in the utilities market, he will have to decide which ownership model to pursue, and his appetite for public finance risk. He and his team may also have to consider how to balance his ‘Manchesterism’ instincts that preach the virtues of devolved power, with an urge to bring fragmented public utilities, including different regulatory bodies, back into one nationally controlled organisation.

At present, the UK’s utilities market is structured through a unified regulatory framework across Great Britain, while Northern Ireland operates entirely separate energy arrangements. The Office of Gas and Electricity Markets (Ofgem) covers England, Scotland, and Wales, the Northern Ireland Utility Regulator manages Northern Ireland independently.

Ofgem sets the energy price cap, enforces license conditions, and oversees wholesale and retail markets. For system operations, The National Energy System Operator (NESO) balances electricity supply and demand dynamically across the whole of Great Britain.

Water and sewerage companies operate under economic regulation by Ofwat, in England and Wales, whereas Scottish Water is publicly owned by the Scottish Government. In Northern Ireland, water is delivered as a single public utility (Northern Ireland Water) rather than through privatised regional companies, like the rest of the UK.

Private Property

After the Second World War, the newly-elected Labour Government in the UK began a programme of nationalisation. At the time, there was widespread political consensus that the ‘state’ would have to play a bigger part in rebuilding the shattered infrastructure and economy of the UK. This resulted in state ownership of the major utilities (including water, gas, electricity and telecommunications), heavy industries (such as steel, shipbuilding and coal) and the transport industries, notably the railways.

However, over time, this consensus began to fracture and by the late 1970s there was growing support for the privatisation of these large, state-owned monopolies in order to fire up a market-based economy with greater competition.

The bulk of this transition began in the 1980s under Margaret Thatcher and continued through later administrations, when the UK government sold off numerous nationalised industries, utilities and transport networks to the private sector.

Table: Big UK Privatisations

1. British Gas (1986): Sold via public share offer with the famous “Tell Sid” advertising campaign.
2. Electricity Supply Industry (1990–1991): Split into 12 regional distribution companies, e.g. Eastern Electricity, Norweb and SWALEC, and generating firms like National Power and PowerGen.
3. Water and Sewerage Companies (1989): Ten regional authorities in England and Wales transferred to private ownership.
4. British Aerospace (1981): The first big manufacturing sell-off, followed by full privatisation later in the decade.
5. British Airways (1987): Transferred from state ownership to a public plc through major share sales.
6. British Airports Authority – BAA (1987): At initial privatisation, BAA controlled Heathrow, Gatwick, Stanstead, Glasgow, Edinburgh, Aberdeen and Southampton airports. The Competition Commission forced BAA’s breakup in 2009, which saw its airport portfolio gradually sold off.
7. British Rail (1994–1997): Broken up into private train operating companies and track infrastructure manager, Railtrack – subsequently Network Rail.
8. British Telecom – BT (1984): Floated on the stock market as the initial giant telecommunications sale.
9. Cable & Wireless (1981–1985): Government stake sold off in successive tranches.
10. Royal Mail (2013–2015): Floated on the London Stock Exchange in stages, completing full separation from the state.
11. British Steel (1988): Returned to private sector operation – now renationalised.
12. Rolls-Royce (1987): Aero-engine maker denationalised.
13. British Coal (1994): Remaining mining assets sold off to private operators.
14. National Bus Company (1988–1990): Individual operating units sold off through local management buyouts and trade sales.

Some of these privatised companies/industries – natural monopolies, like water, rail and power companies, where the cost to new entrants of putting in infrastructure was prohibitive – were set free from state control but with strict regulatory oversight.

Looking back at the results, we can see a mix of success stories, some patchy examples and a few that have not gone as planned. The shining lights have been the likes of BA, Rolls-Royce and the telecoms companies, which have all improved their services, made huge profits for their investors and continue to innovate as a result of competition.

Those in the grey area include some rail companies that have performed better than others, plus a few well known investment issues at Railtrack/Network Rail.

At the bottom of the scale of success, repeated pollution breaches by water companies, inadequate investment from owners and a £20bn debt crisis at Thames Water, which faces being renationalised by Burnham’s government, have been a cause for concern.

Public Service Corporation

In the Institute of Directors’ view, there exists a middle way between private and public ownership which could be achieved through changes to the sector’s corporate governance.

In our pre-election ‘manifesto’, published in 2019 and in the wake of the collapse of Carillion, the IoD made the case for the establishment of a newly-defined corporate form – the Public Service Corporation – through which the provision and outsourcing of public services and related activities could be delivered.

The underlying legal framework of such an organisation would require a balance to be maintained between the interests and obligations relating to its various stakeholders, including its shareholders, employees, pensioners, creditors and customers. This duty would be embedded in the statutory legal duties of its board of directors.

At present, the boards of public utilities and other public service providers face an unenviable task. On the one hand, they are required by the Companies Act to prioritise the interests of their shareholders. However, this often conflicts with the understandable demand of the public to prioritise public service delivery and infrastructure reliability. Regulators find themselves attempting to arbitrate between these conflicting priorities, often with unsatisfactory results.

The delivery of public goods and services through a new type of corporate form, the public service corporation, would provide directors with an explicit legal framework through which to reconcile competing demands over their decision-making. The directors of such companies would have a legal obligation to balance the interests of shareholders with those of other stakeholders. This would better reflect the business and political realities in which such companies are operating.

The IoD believes there is no reason why public service corporations could not attract significant private sector investment. However, their directors would have a fiduciary duty to ensure that shareholder returns are not pursued at any cost. Although not an immediate solution to the current crisis at companies like Thames Water, such a re-defined governance framework could place public service providers on a more sustainable footing in the longer term.

Conclusion

The PM knows that addressing the issues facing Britain’s public utilities and their struggling infrastructure is going to take more than a smile and a cool t-shirt.

We’ve set out some examples of how public utilities are owned and managed in other countries, including different forms of nationalisation and state involvement. And we’ve provided a brief overview of the UK’s privatisation experience. We’ve also outlined some of the challenges that Burnham is going to face pretty quickly as he settles into life at Number 10 – not least the looming £20bn debt crisis at Thames Water, the country’s biggest water company.

He will know that his next move could mean the difference between keeping rivers and beaches clean and water flowing from the taps for generations to come.