Sewage saga at Southern Water hobbles Macquarie’s plan for UK water profits

Macquarie’s second attempt to extract riches from England’s water system has come up against fierce local opposition due to massive executive pay packets and sewage.

Macquarie Bank's British water company Southern Water dumps raw sewage on some of England's most famous beaches.

Shareholders reeling over executive pay and English beach towns have an enemy in common. It’s Macquarie.

Southern Water, which provides water and waste disposal across Southern England from Kent to Hampshire and the Isle of Wight, is one of the Australian investment giant’s UK infrastructure bets.

Local politicians and media across the south coast of England are dialling up their activism against Southern Water, fed up with its poor supply, rising prices, and dumping of sewage. The strife at Macquarie’s water assets isn’t new, it faced a similar reckoning when it owned Thames Water, which is now so financially troubled it is facing nationalisation. But it comes as shareholders handed the investment giant a humiliating strike on Thursday over its executive pay and regulatory blindness.

Southern Water is proving to be a black hole for Macquarie, with no dividends planned until 2030. In the interim, it has regulatory battles to contend with and billions of dollars in required capital spending.

The ASX-listed financial giant picked up its majority stake in Southern Water in August 2021, having exited Thames Water profitably in 2017.

The investment came via funds managed by Macquarie Asset Management.

Macquarie’s chief executive Shemara Wikramanayake ran Macquarie Asset Management for nearly a decade before taking on the top job in 2018.

But despite Macquarie pumping more than £1bn ($2.06bn) into Southern Water, topped up with a £550bn injection in mid-2023 aimed at stopping leaks, Southern Water has continued to dump filth into local waterways and looks set to deny Macquarie returns for at least five years.

Filth from Southern Water’s outfalls along England’s coast.

Southern Water was one of the sector’s worst performers, fined £126m in 2021 for deliberately pumping billions of litres of raw sewage into protected seas in an attempt to avoid the cost of treating it.

The UK’s water regulator Ofwat found Southern Water was so bad it put the utility on a reporting program that only wrapped up in October 2024, with a final assessment now underway over the company’s compliance.

Locals say filth continues to be dumped on England’s southern coast, and lifeguards warned swimmers not to enter the water when The Australian visited the popular seaside town of Brighton on a sunny day earlier this month.

Even after light rain, unclean water is discharged leaving seas tepid and turgid, one of them said.

The water problems blighting the south coast had grown increasingly worse over the decades since the privatisation of England’s water providers, according to locals.

Swimmers were warned to stay out of the water in Brighton when The Australian visited.

Southern Water discloses water quality across its catchments, offering live updates of its disposal of waste water.

When The Australian visited Southwick beach, it and its near neighbour Shoreham Beach were both flashing water quality warnings, with a visible brown slick on the sea’s surface.

Researchers have found Southern Water dumped sewage into several areas known for their oysters.

But Macquarie’s Southern Water says it is the only water operator to have reduced pollution between 2021 and 2024. A spokesman said the company has “also delivered the highest reduction in sewer flooding, and the second strongest improvement in water quality”.

Macquarie CEO Shemara Wikramanayake. Picture: Britta Campion / The Australian

Mike Owens, a local campaigner, said Southern Water’s discharges were an “environmental disgrace”, and beaches across the area were still being “routinely polluted”.

Mr Owens said Macquarie’s water company was “harming public health, deterring tourism, and damaging marine ecosystems”.

“Residents and visitors alike are left exposed while the company profits, there are no credible or even ambitious plans to put this right,” he said.

“Southern Water claims that sewage releases only occur during exceptional rainfall — but that is simply untrue. Discharges happen during moderate rainfall and even, at times, without any rainfall at all. It’s disgusting, and many of us are increasingly worried about becoming seriously ill.”

While Southern Water has not paid Macquarie a dividend since the stake was acquired, the debt pile has continued to grow, topping £5.7bn in 2025, up from £4.9bn in 2024.

Southern Water is also going to war against Ofwat over attempts to slug residents with the highest bill rise of any water operator in England, after the regulator signed off on a 53 per cent increase for its 4.7 million customers.

A decision on allowing further price rises is expected by early 2026.

“We are confident in the strength of the case and supporting evidence,” a Southern Water spokesman said.

Locals in areas serviced by Macquarie's Southern Water are campaigning against sewage and untreated water being dumped into local waterways.

Southern Water has been criticised for showering cash on its boss Lawrence Gosden who was handed £691,000 under a long-term incentive plan this year, on top of his fixed pay of £687,000.

This is despite the utility being banned from paying bonuses after a catastrophic sewerage leak in England’s New Forest area in Hampshire.

A Macquarie spokesman did not respond on the record when asked if any staff had faced remuneration consequences over the issues dogging Southern Water.

Macquarie Asset Management’s head of utilities and networks team Will Price sits on Southern Water’s board alongside operating partner Neil Corrigall.

Ms Wikramanayake, Macquarie’s CEO, was paid nearly $50m in the past two years.

Shareholders voted down the company’s remuneration report with a 25.4 per cent protest vote.

Climate activists are descending on the investment bank, too.

Market Forces chief Will van de Pol said its executive riches were incongruous with dirty beaches.

“Macquarie must manage the massive financial risks posed by the climate and environmental impacts of its business, and fat executive bonuses should be slashed when the company fails in these areas,” he said.

The Australian Securities and Investments Commission went public with five files on Macquarie in one year for various regulatory breaches, and its chair Joe Longo in May said it was infected with “a kind of hubris”.

Macquarie is operating with a $500m capital penalty imposed by the Australian Prudential Regulation Authority over compliance failings at the bank.

Originally published as Sewage saga at Southern Water hobbles Macquarie’s plan for UK water profits