The longest day of the year is already behind us, so as the year reaches its mid point, this is an ideal time to take a step back and look at the latest market trends in the water industry. What has happened so far this year, and where is the industry heading over the coming months?
Under fire following the Beast from the East
It seems a long time ago now, but when the Beast from the East blew in back in February, it left tens of thousands of customers across the UK without running water for several days. The matter is still being discussed at the highest levels, and when Ofwat CEO Rachel Fletcher was interviewed on BBC Radio 5 Live last week, she spoke of the hardship experienced and laid the blame squarely at the door of the water companies.
She said there is “no excuse for this kind of failure,” and blamed the lapse on companies failing to have a true grasp on market dynamics and exhibiting a lack of planning and communication. She suggested that the £7 million that companies have already paid out in compensation is probably not enough and that existing guidelines would be reviewed.
The fallout from the freak weather conditions in February is just one example of the increased regulation and control that Ofwat is implementing in the run up to PR19 next year. But there are some commentators who feel that the new methodology is going to be unsustainable.
Financial analysts at S&P have warned that the new regulation, which seeks to protect consumers with fixed pricing structures, will leave water companies between a rock and a hard place. As an executive from one major water company put it: “More accountability, more stringent requirements and getting paid less to deliver it. That’s PR19 in a nutshell.”
According to S&P, the potential impact is that the sector will become less attractive to investors, leading to a less stable market and possible cash flow difficulties. However, it is not all bad news. They also pointed out that right now, companies still have time to really understand their market to identify areas where economies and efficiencies can be introduced before the new regulations come into effect and thereby increase their own levels of competitiveness.
In November, the UK water industry will come together under one roof at Water 2018. This two-day conference will be held at the Radisson Blu Hotel on Portland Place in London, and will include speakers from all the major water companies, as well as Rachel Fletcher, the CEO of Ofwat, and Sarah Hendry, Director of the Department for Environment, Food and Rural Affairs.
This will provide an opportunity for all the major players in the UK water industry to exchange views, ideas and innovations to meet the challenges to come in the months and years ahead. We will provide more news on the conference closer to the time, as well as a report on the key presentations after the event.