The publication of Ofwat’s draft determinations around future investment in the water industry, and how much that will cost consumers, caused a wave of commentary from companies, campaigners, and industry bodies. I see people, on all sides, who genuinely care about the cleanliness of our rivers, the security of our drinking water, and the impact of rising bills.
This is just the opening salvo in what will be an intense period of discussion and lobbying ahead of Ofwat’s final determinations in December. These discussions will be viewed through the prism of continued media scrutiny, which will only serve to intensify the debate.
Most people are now aware of the scale of the challenge facing the water industry. The irresistible force of generations of underinvestment is hitting the immovable object of hiking bills during a cost-of-living crisis. The need to provide safe and clean water services, future-proof critical assets like reservoirs, and encourage investors to put private capital into the industry demands constructive debate, not invective or hyperbole, from everyone involved.
It’s time to reset the narrative.
Inevitably, as a country, we would do things differently if we had our time again. The balance between bills and investment, the accumulation of debt, and some short-term thinking have all contributed to where we are now.
But the past is the past; it can’t be changed. We can, however, learn from it.
The UK needs to improve its ageing water infrastructure, build new reservoirs, attract investors with a sensible return, and keep bills as low as possible. These are inarguable facts; the debate is around the relative balance between them.
As well as resetting the narrative, it’s vital to be strategic. The UK hasn’t built a new reservoir for more than three decades (the last one was Derwent in the early 1990s) and their delivery can take many years. At Costain Group PLC, we’re helping some of the water companies investigate their strategic options in this space, but how many new reservoirs will the country need by 2040? What climate resilience will be essential by 2050? Together we must make sensible, long-term decisions now, so our children are not faced with history repeating itself.
One of those decisions might be around the length of the regulatory period that Ofwat is looking at for the determinations, which covers 2025 to 2030. The regulator could look beyond this, examining 10 or even 20-year periods with interim reviews along the way. This would mean projects can be planned properly, reducing the risk of cost overruns which are often the result of rushing into a scheme.
Every CEO I meet wants to commit to investing in the UK; a longer-term plan would give them the consistency, continuity and confidence to do so and would mean we attract and retain the talent we need. Committing to longer-term plans would also align with the recommendations of the National Infrastructure Commission’s second assessment to offer reassurance over demand and reliable expectations of project delivery, benefiting investors and the public. It would also align with the new Government’s commitment to produce a ten-year infrastructure strategy. With the right system in place, every CEO and investor would be happy to be held accountable for their promises.
The need to future-proof our water infrastructure has never been greater. The combined effects of ageing assets, rising populations, and the growing threat of climate change have created a critical need for change. But these challenges cannot be solved in isolation. The UK needs world-class continuity and ground-breaking collaboration between the industry, policymakers, stakeholders, and government agencies to deliver the progress needed.
So, let’s have a sensible discussion and arrive at final determinations that strike the right balance. Determinations that are informed by light, not heat. Inevitably, they won’t please everyone, but the past has left us with a difficult balancing act and some grumbling from all sides would probably mean we’ve got the trade-offs about right.
Let’s pool our constructive opinions and diverse expertise to safeguard the future, enabling people and the planet to thrive, and build a sustainable water ecosystem that’s the envy of Europe.
