Water sector - staying ahead

In being successful its vital to know what the strategies of your customers are and what the competition is doing.

• What are the aims and objectives of your customers?
• How do they define success?
• How well placed are your competitors to deal with the ‘New Normal’?

I know from my own exoperience its very easy to become internally focussed, particularly during difficult times – but its precisely at these times that an even stronger external perspective is absolutely vital. It provides vital intelligence and understanding of changes ahead, a useful sense check and challenges what you are doing.

• Do you know what your customers are doing to meet the demands of the “New Normal’?

There’s a lot of information available but even more importantly its vital to be talking directly with your key customers and others in the industry. As you would probably expect me to say, you can always enlist the help of cosultants to give you that external perspective. 

Building a succesful future

We have already discussed the new normal and its consequences and short and long term successes. What I propose is a set of challenges designed to assess just how ready your organisation is to deal with what ever the future holds.

Firstly let’s consider management

1            Do you managers undestand the potential implications of the new normal?

By this I mean do they have a good understanding of the main drivers in the water market, do they really understand what are the critical objectives for  customers and are they clear about how value can be added and how the service/ product offering can be clearly differentiated from the competition?

2            Have your managers identified the critical success factors to adapt to the changing market and economics?

This means having a highly capable and flexible team, having everyone focussed on how they can help customers achieve their goals as well as being strongly focussed on cost effectiveness and constantly striving to improve.

The key is smart management. This means:

• Really knowing your customers and their requirements
• Being able to identfy where value can be added and having the flexibility to develop the products required
• Being clear on who the customer’s key decision makers are and building excellent relationships 

Success in the water industry

In the previous post I referred to the ‘New Normal’ and what it might mean for water industry suppliers. Today I cover the question of what success will mean in the new normal.

The new normal prediction means that we are very unlikely to return to a repeat of the boom years of profitability.

So what success will mean is:

• Firstly being ahead of the competition – across a balanced scorecard of key benchmark indices as as well as less tangible factors such as innovation and people development
• Being profitable and having the funds to selectively invest in winner projects as well as organic growth
• Achieving sustainable improvements that leave you well positioned for the future e.g. innovation, training, organisation and process improvements

So having defined success the question is how do we achieve it?

Water industry strategies for the new normal

At this time of year it is customary to review the last year and think forward to 2011. A phrase we hear endlessly in the press after every event is “learn the lessons”. The water industry may be highly regulated but this last year was a salutary lesson that it is not immune to the wider economy. So what is the ‘New Normal’ for the water industry?

The term ‘New Normal’ was coined backing March 2009 by Bill Gross, founder of PIMCO, the California based investment solutions provider. PIMCO was one of the few organizations that warned of the risks associated with the sub-prime housing bubble that drove the American economic boom years.

In terms of the economic recovery, PIMCO discredited the idea of a sharp rebound from recession and a rapid return to the activity of the boom years. Instead they referred to a “New Normal’ which would bring lowered living standards, higher unemployment, stagnant company profits and disappointing equity returns.

So what is the ‘New Normal’ like in the water industry?

Customers are focusing on outcomes not services or products significantly changing spending behavior

Financial crises, fear of double dip recession and Government spending cut backs are driving a more risk adverse climate and a constant need to reduce costs

Customer expectations are steadily increasing

The net effect is a constant desire to do more for less. This is creating a major headache for suppliers in the water sector.

How to deal with this headache will be the theme of blog posts this week.

Yorkshire partnership to achieve excellent bathing beaches

Photo source: Yorkshire Water

Yorkshire Water are one of the first to aim to achieve the new “excellent” standard coming into force in the 2015 revised Bathing Water Directive. As part of the  AMP5 settlement Yorkshire Water has secured £119 million to help fund the work to upgrade its wastewater treatment facilities on the East coast.

Yorkshire Water have recognize that to achieve its aims it is vital to work in partnership with other organistions including the National Farmers Union and Defra as well as councils. Tackling bathing water quality is not easy given the impact of diffuse pollution as well as sewage discharges. Its vital to ensure investment is targeted where it will have the biggest impact and this means taking a holistic approach and being prepared to work with other stakeholders. Partnership working is absolutely key to ensuring the real problems are identified and Yorkshire should be applauded for taking the lead on this.

Full speed ahead on anaerobic digestion partnership

Photo source: Berrys

The Government is moving rapidly ahead to increase energy from waste through anaerobic digestion (AD). It is working to a remarkably tight timescale publishing its plans last week and with a deadline to respond to the invitation to work with Government on the strategy of 12^th December. This clearly shows that the coalitions business orientated approach of having clear deliverables and prioritising effort to meet its structural reform plans is working.

The use of AD technology is well understood in the water sector, where companies like Severn Trent have used AD for many years. Similarly in Europe AD is a well used technology for generating renewable energy on farms where the feedstocks are usually animal manures and energy crops.

The key to further growth is in getting the economics right so that it becomes an attractive investment and the necessary finance is opened up. Rightly the Government has identified the need to focus on commercializing the markets for input feedstock and digestate use in order to facilitate commercialization. The partnership approach proposed between Government and industry to identify the actions needed to allow the AD industry to flourish and identify the blockers is to be applauded.

Water companies win right to keep pollution secret

Photo source: Sunday Times

In an important tribunal ruling this last week the water companies won their appeal that they are exempt from the environmental information regulations on sewage and pollution. This means they don’t have to disclose details of pollution incidents in their region.

The right to know or the right to keep private information is a challenging and difficult area for the water companies. It revolves around the public’s perception of whether the water companies are truly private companies or managing water on behalf of the state. It also sits uneasily with the Corporate Responsibility Statements of the water companies.

The root issue is the continuing problems with unsatisfactory intermittent discharges (CSO’s). There is no doubt that the UK’s aging sewage network is increasing overloaded and needs massive investment to reduce the frequency of spillage of untreated sewage into water courses and the sea. But its an area the water companies would rather move slowly on given the huge investment implications and impact on customer bills. Lined up against them are powerful voices such as the Sunday Times with its water rats campaign and the BBC Panorama programme.  Driving this is the rapid growth in water contact sports like surfing and the increasing number of influential opinion makers participating in water sports.

Lessons from other industries suggest that trying to prevent disclosure of information is not a tenable long term position. Better to start an informed  debate now about what can be done, what it would cost and how much we can afford to spend. 

Further consolidation in water sector

Photo source: Paul Hipwell

Biwater Holdings has announced that it has agreed the sale of its subsidiary Biwater Services to MWH Contractors. This follows on from the consolidation into one group, Ovivo, of Emico Water Technologies, Enviroquip and Christ Water Technology.

Given the tight margins and depressed volume of work further consolidation amongst suppliers looks inevitable. The real concern for the water industry is how to stimulate R & D. The water companies are looking to suppliers to innovate yet spending by suppliers on R & D is declining. It is only the French water conglomerates like Veolia who still spend significantly on research.

What innovation that is coming has mostly been developed in other industry sectors. The challenge for the water industry is to find a way to encourage more innovation, this must mean rewarding suppliers and creating an environment where risk taking is encouraged (no innovation is without risk). Neither is likely to happen. 

Wastewater National Policy Statements consultation

Photo source: Thames Water Abbey Mills discharge 

Consultation has started on the National Policy Statements (NPS) for wastewater. This document sets out the criteria with which the Infrastructure Planning Commission and its successor the Major Infrastructure Planning Unit (MIPU) will use to judge whether major wastewater projects should be approved. As this blog predicted the NPS specifically covers the Thames Tideway Tunnel and Deepham Sewage Treatment Works.

The last Government brought in a totally new ‘fast track’ planning process for major infrastructure projects (2008 Planning Act), and the National Policy Statements are an important element of this process. The Government has made clear that they envisage a seemless transition from the IPC to the MIPU and that the NPS will still apply.

The consultation process announced by DEFRA is an important opportunity to comment on whether the NPS are fit for purpose and provide an adequate framework for the IPC to judge whether major wastewater projects should be approved.  The concern has to be that interested groups will not appreciate how important these documents are and that once agreed then the rules are effectively set in stone and can’t easily be altered. 

Managing risk of water supply failure

Photo source: Ofwat

Extreme weather events such as the 2007 Gloucestershire floods led to the flooding of many water and sewerage assets and left 350 000 consumers without water supplies for 16 days. It brought into sharp relief the threat to our normal way of life that extreme weather events pose. Since then there has been significant investment in ‘resilience’ reducing the risk of service disruption.

Ofwat’s latest focus report on resilience is to be welcomed. Its central argument is that risk should be looked at not in terms of asset failure but on the effect on service to people. Taking a customer based approach has to be right. Who cares if a critical pump fails provided the water supply can still be maintained from another source? 

Organic wastewater to energy

Photo source: Thames Water 

There is a quiet revolution going on in the water industry. The advent of carbon credits, feed in tarrifs and a sustainable approach is changing the economics and stimulating the rapid growth in energy from wastewater plants.

Two announcements this week highlight the change. Thames Water are now exporting biogas (methane) from its Didcot sewage works into the gas network.  While in Yorkshire an Archimedes screw and an ABB motor and variable speed drive operating as a generator is enabling electricity to be generated from the hydraulic head available.

Neither of these examples are using revolutionary technology – Archimedes screws date back to the Romans.  What has changed is the mindset. Thinking holistically about the potential energy generation as well as the wastewater process is the key. It requires a multidisciplinary approach and thinking of wastewater as a resource, full of potential energy, bioenergy and biomaterial.

Organic wastewater to energy

Photo source: Thames Water 

There is a quiet revolution going on in the water industry. The advent of carbon credits, feed in tarrifs and a sustainable approach is changing the economics and stimulating the rapid growth in energy from wastewater plants.

Two announcements this week highlight the change. Thames Water are now exporting biogas (methane) from its Didcot sewage works into the gas network.  While in Yorkshire an Archimedes screw and an ABB motor and variable speed drive operating as a generator is enabling electricity to be generated from the hydraulic head available.

Neither of these examples are using revolutionary technology – Archimedes screws date back to the Romans.  What has change is the mindset. Thinking holistically about the potential energy generation as well as the wastewater process is the key. It requires a multidisciplinary approach and thinking of wastewater as a resource, full of potential energy, bioenergy and biomaterial.

Sustainable Water - ensuring it is affordable

Photo source: Ofwat

Water is something that is free but you still have to pay for it and its something everybody needs every day but no-one can chose where or who to get it from. That’s the view of George Day Ofwat Director of future charging and it is the dilemma facing Ofwat as it develops its strategy for future water charging.

The facts are stark. For over 20% of Southern Water’s customers the water bill takes over 3% of their household income. Yet Southern Water is about to implement its Universal Metering Programme that will see water bills go up by over £100 for 50% of its customers. How will this help affordability, especially in these tough economic times? This is likely to be very difficult to sell to customers. The water industry needs to think like a business and be very clear on what benefit customers will see for this increase in their bills.

With the Universal metering programme there is a real risk that customers will be cynical about the motivation for metering and whether it really is in their best interest. What clear benefits will customers see for the extra £100? Southern Water will need to do an exceptional job in selling the benefits if it is not to create a customer backlash and problems for all in the industry.

Water leakage targets missed

Photo source: Thames Water

News from Ofwat that more than a quarter of all water companies failed to meet their leakage targets last year will add to the pressure to improve performance. Yorkshire under performed by a massive 7.3 % and Southern and Northumbrian also missed their targets.

Ofwat is threatening tough action to force compliance. There is no doubt that last years hard winter made the situation much more difficult. However hitting leakage targets is also becoming more difficult for several reasons especially:

• o   The use of more plastic pipework
• o   An increasing 24/7 lifestyle and multi occupancy houses
• o   The aging water distribution network

All the trends are going the wrong way on leakage and meeting the every tighter leakage targets is becoming significantly more difficult. Water companies are trying new technologies but are not keeping pace with a toughening climate.     

Sustainable Water- will it lead to a smaller Ofwat?

The Sustainable Water review that Ofwat is currently undertaking is looking at how regulation needs to change to reflect the major change affecting the industry and ensure a sustainable long term business. Ofwat is currently looking at price regulation and its impact on maintaining financial stability, especially the vital importance of reputation to water companies, as well as social sustainability and environmental sustainability.

With external pressures on Ofwat, like the move to smaller government and less regulation and the David Gray review, Ofwat is proposing to take a more risk based approach to regulation. This has to be a sensible move. Its clear the burden of data reporting is getting excessive, for example the June return guidance has gone from about 65 pages to 800! A risk based approach would mean Ofwat only focusing in depth on the vital areas and in others regulating with a light touch. 

Directors from the water companies made it clear yesterday that they support the steady evolution from input based regulation through output based regulation (where we are now) to outcome based regulation. They see this as giving more room to water companies to manage their business and focus on what is really important to stakeholders. The difficult bit is defining the outcomes we all want from the water sector in terms that are not so broad as to be meaningless. A move to a risk based approach with clear prioritisation reflects what every good business does and has to be a step in the right direction. 

Otters back in rivers

Photo source: Environment Agency

Otters, which almost most disappeared from England’s rivers in the 1970’s are making a welcome return. They are now found in every region of England except Kent. This is due to the ban on harmful pesticides put in place in the 1970’s and also a significant improvement in river water quality.

 This excellent news is to be welcomed and comes at the same time as the River Thames has won a prestigious international award for outstanding achievement in river management and restoration.

However Joe Public may find it hard to understand why Thames Water is at the same time seeking to gain support for the vast Thames Tideway Tunnel project and will need to raise bills substantially to cover the cost.  Good news stories are to be welcomed but there is a tricky balancing act to ensure the public is kept on side.

Phosphate recovery first for Thames Water

Photo source: Thames Water

It’s a common theme in the water sector that people are trying to do more with less. Reduce costs, increase efficiency, reduce energy use, recover resources. To succeed a different mindset is needed.

This is about costs. Just looking at phosphate recovery as a way to manufacture fertiliser wont work as it will inevitably have a much higher cost base. Nor will it be economic as a way to reduce the cost of struvite build up on pipework . But combine the two and you have a winning proposition.

This is what is happening at Thames Water ‘s Slough wastewater treatment works where Phosphorus is to be extracted from sewage on a commercial basis for the first time in the UK. The new £2million facility, from Canadian company Ostara, meets several goals. Its estimated it will save £130k to £200k a year in chemical dosing, bring in an income stream from selling the fertiliser produced and help Thames Water meet environmental regulations on nutrient levels in waste water.

To succeed in this area you need to know two markets. The wastewater treatment market and possible cost savings and environmental requirements and the market for the product being produced. It is vital to simultaneously build an outlet and channels to market for the product being produced.

A thirst for innovation

After the Tata Nano car comes the Tata Swach, a ground breaking water purifier that seeks to address the problem of waterborne disease at a cost that makes it available to “have-nots”.

Safe drinking water is a basic human need. The World Health Organisation estimates that a child dies of a waterborne disease every 15 seconds. The vision for the Tata Swatch is to make water purification available for all - not just the rich.

Developed by Tata Chemicals, the innovative domestic appliance not only takes advantage of nanotechnology but also offers a creative use for a common byproduct from rice production. The Tata Group have found a way to enhance the action of the rice husk ash by adding nano particles of silver, a well established biocide. The filter unit incorporates a clever patented fuse that shuts off the water supply before the Swach becomes exhausted. 

The Swach is a commercial product but its development was also driven by Tata’s strong commitment to corporate responsibility says Sabeleel Nandy, Tata Chemicals head of water purification.

This is a brilliant example of chemical expertise being combined with innovative product design to satisfy a basic human need. Exactly the sort of innovation we need to see a lot more of in the water industry.

Strong performance by water companies

Photo source: Ofwat

The annual report by Ofwat on the financial performance and expenditure of the water companies in England and Wales shows they performed strongly in 2009-10. The companies operating profits rose to £3.5 billion an increase of 7% on the back of higher revenues. The companies overall return on capital was up at 7.2%.

Investment was £4 billion higher than assumed in the 2004 price limits but down 14.9 % from the peak in 2008-09.

The strong performance and figures so close to predictions underlines why the sector is so popular with infrastructure investment funds and pension companies. However in the current harsh economic performance customers may start to question whether they are getting value.

The 2010-2015 final determination means that sound, predictable performance will continue. Harold Macmillan, the former UK Prime Minister when asked about “his greatest worries” famously replied, “events , dear boy, events”. Its extreme weather events that are most likely to cause an upset in the industry and put it back under the spotlight.

Reform of water industry still under discussion

Photo source Paul Hipwell: Axbridge reservoir 

The Coalition Government has confirmed a white paper will be published in June 2011 on reform of the water industry to ensure more efficient use of water and to protect poorer households. It is seeking to enhance competition and improve conservation in the water industry.

As part of the major structural reform of Government underway Defra has published its departmental priorities aimed at reducing costs and achieving the reforms set out in the Coalition Agreement. The objectives include:

·          Help to enhance the environment and biodiversity to improve quality of life.

·          Support a strong and sustainable green economy, resilient to climate change

Having clear objectives is good business practice and Defra should be applauded for making its vision clear. The question now is now quickly will these high level objectives translate into action on the ground?

The debate on competition in the water sector at the recent market reform meeting chaired by Defra focused on a paper from Ofwat on the issues surrounding separating out retail from water operations and asset management. There was no mention of water conservation, efficient use of water or how to support poorer households. To be fair this paper would have been produced before Defra’s new objectives had been published.  It will be fascinating to observe but equally very important for the future of the industry to see whether in light of these new objectives from Defra the approach towards competition radically changes as the new high level objectives imply.

Thames Tunnel goes to IPC

Photo source: Thames Water

The decision announced this week that the Thames Tunnel will be referred to The Infrastructure Planning Commission (IPC) is perhaps surprising. The 2008 Planning Act does not list sewers as nationally significant infrastructure projects so it has needed a decision by a Minister to ensure its covered.

Referring the planning application to the IPC has obvious benefits to the Government as it provides a fast track way of making decisions and keeps Ministers one step removed. It will require the National Policy Statement for wastewater, (due to be issued in draft this autumn) to be revised to provide guidance for sewer projects.

The involvement of the IPC may not make it any easier for Thames Water to gain planning permission. The 2008 Planning Act requires applicants to demonstrate that they have considered and consulted on alternatives. It also gives power to local councils to judge whether the applicants consultation process has been adequate.

This is likely to prove controversial as many local councils are opposed to the huge cost of the tunnel scheme and are already saying that Thames Water has not adequately looked at alternatives. So the involvement of the IPC may actually slow down the tunnel project and lead to considerable further debate on the best way forward.   

Brown flag condemns blue flag beaches

Photo source: Surfers against sewage

Clean water campaigners Surfers Against Sewage are celebrating after Keep Britain Tidy committed to installing warning systems informing the public after sewage discharges at blue flag beaches. This comes after sustained publicity in the National Press and BBC Panamora about the impact of Combined Sewer Overflows on bathing water quality and SAS planting brown flags on failing blue flag beaches.

The decision does clearly illustrate the power of publicity. When next year the public start seeing warning signs about sewage spills at some of Britain’s most popular and picturesque beaches its inevitable that there will be a further outcry.

Combined sewer overflows have long been a contentious issue and a legacy from our decaying and overloaded sewerage infrastructure. It is an issue on which the water companies cannot win. If nothing is done they will be castigated but tackling the issue will require further massive investment and lead to higher bills.

There has been million's spent on improvements but public concern has only increased. The publicity campaign that Thames Water are starting on the tideway tunnel may ironically only increase the pressure.  There is no easy answer but putting off investment will only make matters worse. The Ofwat final determination does allow some expenditure but less than water companies had asked for and much less than will be required to tackle all the blue flag beaches. Its inevitable that the public pressure will eventually lead to increased investment it would be better to act now and put the industry in a better light.

River water quality at highest ever level

Photo source: www.sewta.org

At first sight the figures released by Defra showing that English river water quality is at an all time high level of 73% meeting the good standard should be welcomed. Certainly there has been major improvement over the last 20 years – as there should be given the massive capital investment by the water companies.

Over the next five years the water industry in England and Wales will invest a further 4 billion pounds in raising river water quality. But can we be confident that this will make a difference?

Over the last five years or so there has been virtually no change in river water quality according to Defra despite the huge investment. Under the Water Frame Work Directive new monitoring schemes are now in place. The first 2009 results on “Good Environmental Status (GES)“ will be published next month.

A target has been set by Defra of all rivers meeting the GES target by 2015. Given that only 25% meet the standard in 2008 this sounds highly ambitious. The key will be to ensure the planned £4 billion investment is carefully focused on schemes that will make a real difference – not just squandered on more studies. 

Environment Secretary Caroline Spelman supports Thames tunnel plans

Photo source: Thames Water Vauxhall combined sewer overflow

Environment Secretary Caroline Spelman has this week given her support to Thames Water’s plans for a tunnel to reduce the huge amount of raw sewage discharged into the River Thames. Thames Water estimates that the proposed tunnel will cost £3.6bn which could result in bill increases of around £60-£65 per year for Thames Water customers.

Getting planning approval may not be as easy or straightforward as Thames Water might hope. With the 2008 Planning Act a new ‘fast track’ process was introduced for all major infrastructure projects with approval by the Infrastructure Planning Commission. The Government has announced that the IPC will be replaced with a new Major Infrastructure Planning Unit but this wont happen until late 2011 at the earliest as new legislation is required and the approval process is likely to remain very similar with the exception that Ministers will have the final say.

The legislation requires extensive public consultation with local authorities being given the say on whether they think consultation has been adequate. The experience in the South West with the Hinkley nucleur project is interesting. There initially all the local councils welcomed EDF’s plans as they saw the new nucleur reactor bringing many jobs and significant ‘planning gain’. Now as the consultation by EDF comes to a close they have managed to loose the support of local councils as the forecast planning gains have become derisory – just £1m from a £10 billon plus project and the disruption to local communities more evident.

Thames Water will have a more difficult job. Local councils are opposed to the tunnel from the outset and local residents are unlikely to be supportive of a big increase in bills when most will see no obvious benefit. It will require very careful management of the consultation process if support for the plans is to be won.  

Water utilities successfully raise finance

Thames Water has this week raised another £300 million of debt on the bond market. This follows the £550 million it raised in mid-July. The issue attracted a lot of interest and was placed at 250 basis points over the 4% 2022 Gilt. Some had their allocations cut back. The aggregate proceeds are nearly 10% of Thames regulatory capital value and push the net debt to RCV value close to the 85% maximum stipulated by rating agencies.

United Utilities has also announced that Legal and General plc have upped their sharing holding to 4.23%. This news confirms that despite early fears over the “tough” Ofwat Final Determination actually the water sector remains highly attractive to investors. 

Gray review of Ofwat

Photo source: Defra

The announcement that Defra has appointed David Gray to review whether Ofwat is continuing to offer value for money should be welcomed.

Its clear given the monopolistic structure of the water industry that some form of regulation is essential and Ofwat has certainly played an essential role in the transformation of the water industry since privatisation. But is it really necessary to have almost identical separate regulators in Scotland and Northern Ireland or is this dictated by national politics?

There is overlap between the functions of Ofgem and Ofwat and many would argue that Ofwat is getting excessively complicated. There is a question over whether Ofwat, with its insistence on a five year regulatory cycle’ is neglecting the damage being done to the supplier base by the peaks and troughs in workload. The chance to stand back and review whether Ofwat could be more efficient is absolutely essential otherwise quangos just keep growing to satisfy their own agendas.

Slow growth in water competition

There has been a slow but steady growth in inset appointments. A number of new entrants have emerged including companies like SSE Water owned by the major utility company Scottish and Southern Energy and Avon Valley Water owned by Biwater.

Mostly the inset appointments have been for new housing developments, in Ofwat jargon "unserved" areas, although there appointment has still proved contentious. Typically the new water suppliers are offering their customers a 5 % discount over the Water plc's bulk rates. For developers a number of benefits are offered such as easy adoption of the new foul and surface water sewers and help with investment costs.

New entrants to the market are to be welcomed as they will stimulate new ideas and services for customers. But with the drop in new house building and slow rate of new appointments it will be a very long time before these new competitors are a serious force in the water market place

Negative impact of AMP cycle on water sector

Photo source: De Nora
There has always been a lot of concern by suppliers to the water utilities about the negative impact of the 5 year AMP investment cycle. Now hard figures obtained by British Water have quantified the impact on employment in the water industry. The effect of the downturn in work at the end of AMP4 has been more severe than many had realised. The British Water figures suggest the number employed have dropped by about 45%. The latest official estimate of the numbers employed in the water sector supply chain is 90 000 (EU Skills survey 2004). This suggest that a staggering 40 000 jobs may have been lost.


This loss of experienced people will have a major negative impact on the water industry. Many will have sought other employment or retired early meaning that they will be lost to the industry. There is also the considerable cost of making experienced staff redundant. All this comes at a time when water companies are facing huge challenges to become more efficient, and to find clever ways to deliver the capital programme outputs mandated by Ofwat. When the inevitable upturn in work that the £22 billion AMP5 investment programme will require finally arrives at sooner or later this skill shortage will impact on the capability of suppliers to deliver.

It is hard to be critical of individual water companies who have only acted in their own best interest. However economists have long recognised that the action of individuals can be damaging to the group – that’s one of the fundamental reasons for regulation. Suppliers calls for concerted group action across the water sector have largely been ignored, perhaps because its been hard to quantify the impact.

The British Water is to be congratulated on providing hard evidence of the damage the downturn is causing. But to make the case more robust it needs all suppliers to the water sector to take part in the survey. If your company has not already done so please complete the survey at British Water Survey






The water sector is likely to feel the consequences of this latest downturn for years to come. While it is too late to avoid the damaging impact of this latest downturn action it is not too late to act before the next cycle in 2015.

London flooding risk

Photo courtesy: Thames Water

Climate change will bring increased risks of flooding in London – but how well prepared is the capital to deal with it?

The London Assembly’s Environment Committee has launched a new investigation to find out.

The Committee will focus its review on the flooding risks that most often affect the largest number of Londoners - surface water and river flooding – mapping the risks and assessing challenges.

No agency has overall responsibility for flood risk, so the investigation will review how all the relevant bodies – Environment Agency, local authorities and the GLA - are working together. The Committee will also look at the Mayor’s role.

The report from this committee is not due out till the end of the year but it is safe to predict that the report will be critical of the way the key bodies work together. That was one of the key concerns of the Pitt Review. It is absolutely vital that if the problems of flooding are to be tackled effectively there is clear leadership and a co-ordinated approach – it is far too easy for cash strapped organisations to assume someone else will handle the issues. So news that the Government has announced a £2million boost to funding to help local authorities deal with flood risk assessment is a small step in the right direction but a lot more action is needed.

All Party Parliamentary Group on Sewers and Sewerage reformed

News that the All Party Parliamentary Group on Sewers and Sewerage is to be reformed will come as welcome news to the water industry. Its first meeting is likely to be in the Autumn after the group is re-registered in September.



At the same time the Environment Minister Richard Benyon has announced that Defra is planning two consultations this autumn. One is to establish national standards on sustainable drainage and the other is to review the transfer of ownership of private sewers to water companies. These two areas were key recommendations in the Pitt Review. Potentially they both have big implications for the water industry and could herald welcome new investment. Establishing ownership standards for SUDs is essential to enable their adoption by water companies or local authorities and would remove one of the biggest impediments to their widespread use.

Climate change: opportunity or threat

Photo source : Paul Hipwell

UK businesses need to be ready to face the risks and benefit from the opportunities that climate change could bring, Environment Secretary Caroline Spelman said in a major keynote speech today.

“We know that some level of change is now unavoidable and it is the responsibility of us all to think about what a changing climate will mean for our health, our businesses and our way of life. By planning for the adaptation we need now we can ensure that the UK is best placed to meet the challenges of climate change head-on.

“A warmer climate will bring both opportunities and challenges for businesses of all sizes. I want to ensure that UK businesses are well placed to take advantage of the new opportunities that arise as well as ensuring they are ready for the difficulties that higher temperatures and more adverse weather could mean for their staff and working practices.”


It is ironic that the news came just days after the UK Statistics Authority released the latest national statistics on Land Use Change in England. In a worrying trend it shows that house building on flood plains has actually increased over the last year. In 2009 the statistics show that 11 per cent of dwellings were built within areas of high flood risk (an increase from 9 per cent in 2008). Clearly the messages on climate change risk are not getting through.

This is a worrying trend for the water industry. It will inevitably lead to more incidents of flooding and that will increase yet further the pressure on the water industry to tackle flood risk issues. On the positive side it will also increase the political pressure to allow higher capital spending by the water industry. The Environment Secretary is also right to highlight the potential business opportunities that climate change will generate. Farsighted companies will be investing now in these opportunities.