The German investment giant poised to seize control of bus operator Stagecoach has paid virtually no corporation tax on two of its major UK assets, an investigation by The Mail on Sunday can reveal.
DWS’s investments include Yorkshire Water – which paid zero corporation tax last year and has been repeatedly criticised for pumping sewage into Britain’s rivers.
The Frankfurt-based company was also a significant shareholder in Peel Ports, which owns the Port of Liverpool and London Medway, but which paid less than £10million in tax over the last five years during which it was an investor.
New route: Stagecoach is being targeted by financial powerhouse DWS
DWS is a financial powerhouse which manages €900billion (£750billion) of assets across the globe and is majority owned by Deutsche Bank.
It is in pole position to snap up Stagecoach and is battling against British coach operator National Express to seal a deal.
Stagecoach is the operator of bus services in more than 100 towns and cities across the country.
It is regarded as a key player in the Government’s levelling-up strategy because it provides vital local access to services and jobs for those who are without private transport. But revelations about the tax payments at its other holdings and the record of Yorkshire Water’s river pollution have sparked concerns about DWS’s stewardship.
Tax Research UK director Richard Murphy said: ‘Bus services are incredibly important to those who rely on them. If DWS has been involved in dumping sewage in rivers it is not a fit and proper firm to be running buses.’
He added: ‘Companies operating critical infrastructure in the UK should not have opaque structures which do not allow us to easily examine their tax and governance. Water companies have claimed massive tax incentives and regulator Ofwat has just allowed it.’
George Turner, executive director at think-tank TaxWatch, said: ‘If companies like these reduce their tax liabilities, there is less to invest in other services while Stagecoach still receives significant state support for its local services.’
Stagecoach paid £17.8million in tax in 2019 – the last year before the pandemic wrought devastation on its finances.
DWS is part-owner of Yorkshire Water parent Kelda, which paid no tax last year while raking in £1.1billion of revenues. Scott Auty, managing director of DWS’s infrastructure arm, has been on the board of Yorkshire Water since 2017. During that period, Yorkshire Water has come under increasing scrutiny over sewage discharges into local rivers.
In January, it was fined £233,000 for dumping sewage in a Bradford river. The following month, it paid £300,000 to Yorkshire Wildlife Trust following a sewage discharge in Leeds.
Just a week ago, it was slammed by Ofwat which said it has ‘serious concerns’ about Yorkshire Water’s sewage treatment works, alongside four of its competitors.
According to documents filed by DWS, Auty is among a trio of directors on the board of a newly created vehicle set up to acquire Stagecoach.
Late last year, DWS sold its stake in Peel Ports, which makes more than £100million a year in operating profit and is ultimately owned by a company in the Cayman Islands tax haven. Auty is also a director at investment firm Wharfedale Hong Kong, which paid no tax in 2020 and is controlled by a fund based in Jersey.
Earlier this year, The Mail on Sunday revealed how water companies paid huge charges to service debts and other financial instruments – wiping out profits and tax liabilities.
Rival bids: Ex-Stagecoach boss Sir Brian Souter and his sister Dame Ann Gloag
Last year, National Express revealed plans for a £1.9billion all-share merger with Stagecoach. Sir Brian Souter, who co-founded the business in 1980 and built it into a global group before stepping down in 2019, has backed the deal through his 14.5 per cent shareholding.
DWS subsequently emerged with a £595million cash offer, potentially scuppering the National Express merger. The German bidder is expected to lay out the details of its offer within days.
The DWS bid has been backed by Souter’s sister, Dame Ann Gloag, and institutional shareholder Columbia Threadneedle. The board has recommended DWS’s offer.
Sources close to DWS said the German firm sees Stagecoach as an essential British service producing reliable revenues similar to its existing utility assets.
National Express hopes to create a transport behemoth and plans to cut costs by slashing jobs, including at Stagecoach’s Perth HQ.
DWS sources said significant investments in Yorkshire Water and Peel Ports had allowed it to offset tax liabilities.
A DWS spokesman said its businesses pay ‘all taxes due’.
A spokesman for Yorkshire Water said it paid £148million in other taxes last year and it has invested £2.5billion over the last five years.
