Five takeaways from our podcast with Water UK
We sat down with the business group’s Chief Executive David Henderson to discuss next steps for the industry
1. Investment in UK water is set soar following an apology from companies
The industry has apologised for its record on sewage spills and committed to trebling the rate of investment to prevent them to £10bn. Subject to approval from Ofwat, the plan will see sewage spills reduced by 40% by the end of the decade compared to 2020.
2. The UK’s regulatory system prioritises keeping bills low at the expense of long-term investment
A prominent cross-party House of Lords committee flagged this issue back in the Spring after a detailed inquiry into the water sector. “Had water bills merely risen with inflation since 2010,” David explains, “They would now be 20% higher” than they are today. Ofwat determines the rate of return for investors in the sector, which in the past 12 months has been a modest 3.8%, despite rising inflation increasing the cost of delivery. Water companies have provided an additional £200m to help customers struggling with the cost-of-living crisis. Around 1.2m households now receive some form of support with their bills.
3. The water sector has performed more highly under private ownership than public across many metrics
Close to £200bn of investment has taken place since privatization, considerably more than during comparative time periods under public ownership. Over 70% of beaches are now classed as “excellent” compared to 30% in 1995. Leakage has been reduced by a third since the 1990s. At the same time, water bills have fallen in real terms. Future investment will be contingent on a viable long-term vision provided through Ofwat’s current PR24 price review.
4. A return to public ownership would disrupt pension savings and stretch public finances
The water sector provides stable returns to millions of public and private sector workers through the funds which invest on their behalf. Returning water companies to public ownership would further stretch public finances and leave investment dependent on taxpayer funds needed for other high priority areas such as healthcare, schools and policing.
5. The UK’s planning system is holding back investment in the water sector
The last major reservoir to be built in the UK was completed more than 30 years ago. New plans for increasing capacity have been consistently blocked, either by the regulator or government. The Environment Agency has now accepted that it shouldn’t have prevented reservoir development in the past, and that it won’t do so again unless there’s an especially compelling reason to do so. The sector is now proposing £14bn worth of new projects aimed at increasing capacity alongside plans to address leakage. Delivery is more important than ever, with global temperatures rising, and drought an increased risk in the UK.