UK: Thames Water makes waves. (1 of 4)

UK: Thames Water makes waves. (1 of 4) - The verdict is not in yet on privatisation but even the sceptics at Thames Water have found a new energy and enthusiasm. The City has also given qualified approval to the region of which Roy Watts is uncrowned kin

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Last Updated: 31 Aug 2010

The verdict is not in yet on privatisation but even the sceptics at Thames Water have found a new energy and enthusiasm. The City has also given qualified approval to the region of which Roy Watts is uncrowned king. Helen Kay reports - from above and below ground.

When Roy Watts was made chairman of the late Thames Water Authority, sceptical staff called him "The man who thought he'd taken over an airline". As chief executive of British Airways, Watts had axed 24,000 staff, put services out to contract and raised some £250 million by selling off surplus assets. But by 1983, after 30 years in the aviation industry, he had tired of playing second fiddle to BA chairman Lord King. So when the opportunity arose to head Trans World Airlines he took little persuading, even though it was not TWA but water that carried him away.

Now running a private company which has just announced pre-tax profits of £212 million on turnover of £853 million - a healthy performance by anyone's standards - Watts has made his mark every bit as much as his former boss. But what will secure him a mention in the chronicles of management is not just his stewardship of Thames Water; it is Watts who can claim credit for making the waves that eventually swept water out of the public domain.

Small, with a slightly translucent quality which gives the impression of frailty, Watts does not seem the hell-raiser type. Indeed, as he sips a glass of the chilled Chablis with which he often ends his working day he looks more like a senior statesman than a samurai. But as soon as he took over at Thames he began meting out the measures that he had adopted at BA. "I went in with a sword," he explains, "because I tend to think old companies get fat."

During his first weekend on the job he took home the organisational chart and ended up cutting through several layers of management. Within a matter of weeks his chief executive decided to leave. Forty seven directors followed suit, when he sliced the board from an unwieldy 62 to 15. It was, Watts concludes, "a fairly lonely time".

But, even as he was taking on the old-timers at Thames, he was causing tidal waves outside. Brought in to run the authority "on commercial lines", Watts had so pared down costs that by the end of the year he was able to increase tariffs by only 3%. "Then", he recalls, "the Government changed the goalposts and insisted on an increase of 10%. So I rebelled."

During the public row that ensued, Watts stuck to his guns. "We had a banner on the Thames which said 'No, Minister'," he remarks, clearly savouring the allusion. Though he eventually lost the battle, Watts was to win the war. His persistence in speaking out prompted a House of Commons debate and a commitment to privatisation.

In September 1989 the functions and assets of the water authorities were transferred to the newly created water companies. In return for a network of almost 41,000 miles of water mains and sewers, 124 water treatment plants and 400 sewage treatment works, Thames Water plc undertook to supply seven million customers with water and 11 million with services for sewage.

The privatisation of water had attracted much criticism, both in and out of the industry. In the event the family silver proved pretty tarnished. Years of under-investment had taken their toll and the 10 companies were capitalised at only £5.2 billion. The Government wrote off debts of £4.9 billion and provided a further £1.7 billion "green dowry". As a condition of the terms, the water companies agreed to a 10-year capital expenditure programme worth nearly £25 billion at November 1989 prices. Thames Water's commitment amounted to a daunting £4 billion, but even so, for Watts it was a personal triumph.

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