Financing the Evolution of London’s Water Services: 1582 to 1904

This paper examines the evolution of water supply as a private, for-profit business from its origins in sixteenth century London until its transfer to a public monopoly at the start of the twentieth century. From 1582 onwards, 29 private water companies operated at different times in the area which became Greater London. By 1850, these had consolidated into eight local monopolies operating within mutually-agreed boundaries. The survival of private services depended on a mix of economic, institutional and political factors. Financial sustainability was achieved through early start-up investment subsidies and a pricing policy that kept the basic charge for a household connection constant in nominal terms for two and a half centuries. As quality regulation was introduced after 1852, services were transformed from low-pressure, intermittent and untreated supply, to a treated, continuous, high-pressure service universally available and affordable to all. Over the long run, users paid for services, with wealthier households providing a cross-subsidy to poorer ones through time. The policy implication is that early public sector financial support in the form of grants, soft loans or patient equity may be necessary to launch private sector solutions for water services, and that quality and price regulation is needed to drive quality improvements, achieve universal coverage and cap excess profits.