Good Beach Guide: an improving trend?

More bathing beaches are rated excellent for water quality than last year but pollution has worsened since 2006. The Marine Conservation Society Guide rated 421 of 769 beaches as having excellent water quality. This is an increase from 2009 but less than in 2006.

Rainfall and overloaded sewage systems causing combined sewer overflows to operate are blamed. It also warned then several popular beaches including Rock in Cornwall would fail the new EU bathing water rules due in 2015.

A planned £12.5 billion investment in sewerage services for England and Wales over the next five years is, says the Environment Agency (2010), ‘a recognition of how much more work is needed on these hidden assets’. Scottish Water will invest £2.5 billion between 2010 and 2015, building on the £2.15 billion invested between 2006 and 2010 on the Scottish sewerage infrastructure. Northern Ireland recently invested £614 million in its wastewater collection and treatment systems as part of a three year Strategic Business Plan, and in the longer term Northern Ireland Water expects to spend another £3 billion by 2020

Despite this investment bathing water quality is likely to remain a high profile and contentious issue which will inevitable drive yet further investment by the water companies.

River Basin Management Plans face judicial review

Photo: UK Rivers NetworkThe Angling Trust and WWF have launched a legal challenge over inadequate plans to safeguard the health of rivers and lakes in England. Lodging the documents at the High Court is the first step in the process of applying for a judicial review of the government’s River Basin Management Plans which were submitted to the EU in December to comply with the Water Framework Directive.

If the challenge is successful it will have big implications for investment in the water sector. The two organisations are challenging the legality of the plans because they do not set specific targets or a coherent timeframe to address the poor ecological status of many rivers and lakes in England. The plans also rely heavily on a wide range of reasons for inaction which the Directive only allows to be used in exceptional circumstances.



Currently only 27% of rivers are at ‘good’ status and the Governments plans only increase this by 5%  by 2015. It’s the view of many environmental groups that the EA and Government are not being ambitious enough in their targets. The Environment Agency and water companies are coming under increased pressure with the sustained campaign by the Sunday Times on combined sewer overflows. This comes at a difficult time for the government as it struggles to reduce expenditure. However given that the water companies are privatized this may be an opportunity for the government to show its green credentials. With more people anticipated to take holidays in the UK this year and increasing public concern over bathing water quality it is likely that the pressure to raise standards will only increase underwriting continued investment in the water sector for years to come.  

Dwr Cymru Welsh Water restructures

Following the tough PR09 settlement Welsh Water is terminating its operating contracts with United Utilties and Kelda and bringing the operation of its water and wastewater plants back in-house. As a consequence the number of Welsh Water employees has jumped from only 170 to about 2100. New managers for its water and wastewater operations have just been appointed.

This marks a radical change of strategy for Welsh Water. Job losses of about 300 over the next five years will follow as Welsh Water tries to reduce its operating costs by £38 million. The move is not a surprise – its hard to understand why Welsh Water thought that contracting out its core business would save it money – contracting out can be successful where an external provider can bring specialist skills or economies of scale. For Welsh Water’s core operation neither reason applied.

Welsh Water will continue to contract out its capital programme delivery with the core delivery partners, Costains, Morgan Est, Laings , Black and Veatch and Imtech being retained for AMP5.

Water industry moving out of the trough

There are signs that business in the water sector is slowly starting to pick up. AMP5 started, of course, in April this year and most water companies have concluded their new framework agreements. There are still problems with a few water companies where procurement problems mean that contracts have still not been finalized.

As yet visibility on forward work is very limited. This means its very difficult for major contractors and suppliers to plan and consequently impossible to deliver the efficiency savings that the water companies are seeking.

This last year has been probably the most difficult ever in the water sector. It has been in effect a “double dip” with for the first time the periodic review process in England and Scotland coinciding. Secondly unlike other sectors such as Highways there has been no Government Fiscal stimulus. The result has been that many major suppliers have had to reduce staff by typically 25%.

Although many water companies maintain that they have managed to smooth out workloads suppliers are seeing a very different picture. The situation seems to be particularly severe with the highly geared water companies who have had to curtail expenditure as obtaining funding became more difficult. The true position will emerge once the June returns are published.

While there is no doubt workloads will increase as AMP5 progresses there has to be a serious concern that those laid off will have been lost to the water sector for ever and as a consequence the staff shortages evident a few years ago will return. With some suppliers withdrawing from the water sector there is a real risk that water companies will see costs increasing significantly as suppliers struggle to cope with the fluctuations in demand.

United Utilities sells Australian operation

Photo: United Utilities

UU has today announced the sale of its Australian Division for £126m in cash and £30m in debt (A$225m). This is at the lower end of analyst’s expectations. The business was sold to a consortium led by a new entrant to the Australian market Mitsubishi Corp and Manila Water. UU only recently decreased its stake in Manila Water selling out to Ayala Corporation.

United Utilities has made clear its strategy to sell its outsourcing arm but this deal suggest the value of this business may be significantly lower that the company hoped. UU contract solutions has failed to secure contract renewals with Welsh Water and Scottish Water for AMP5 and while they have retained their contract with Southern Water it does have a smaller scope.

Veolia Environment has also hit problems with its long term operating contract model. Its share price has dropped from a peak of $62 in 2008 to $24 today. This does suggest that in these harsh economic times operating contracts are not as attractive as they once seemed. 

Election result - common ground on water

Photo courtesy Yorkshire Water

 Reading the election manifestos of the three main parties there is at least lots of common ground on water issues. All three recognise the potential impact of climate change on the water industry and the need for more action to tackle flooding and water supply as well as action to promote water efficiency.

The risks inherent in building on flood plains and the need to continue taking forward the Pitt review recommendations are recognised. This is shown by the all party support for the Flooding and Water Bill that went through just before parliament was dissolved 

The approach to planning and major infrastructure projects is different with the Liberals and Conservatives both seeking to abolish the newly created Infrastructure Planning Commission and to make planning decisions more locally accountable.

All parties back the need for continued infrastructure investment and with AMP5 programme agreed the current £22 billion investment plans for the next five years are safe. Perhaps the biggest area of difference is in the parties attitude to the Walker review on pricing. It is only the Liberals who are seeking to even out some of the regional discrepancies in water bills. In conclusion while the main parties resolve how they are going to govern it should be business as usual for the water sector.