News

Regulators ‘Failing’ To Drive Essential Investment In The Water Sector

A new report from the National Audit Office (NAO) has found that the Department for Environment, Food and Rural Affairs, Ofwat, the Drinking Water Inspectorate and the Environment Agency are all failing in their ambitions to drive necessary investment in the water sector, leaving it facing serious supply, infrastructure and environmental challenges.

These challenges include an expected daily shortfall of five billion litres of water per day by 2050, with the sector needing to attract significant funds in order to address everything successfully.

Unfortunately, this need for investment comes at a time of weakening financial performance, falling investor confidence and declining public trust, with Ofwat now concerned about the financial resilience of ten out of the 16 major water suppliers.

In order to meet future water demand, the industry will need to build 30 new projects costing £52 billion, including nine new reservoirs… and the good news is that these projects are already underway. However, this £52 billion comes on top of the £47 billion that Ofwat anticipates will need to be spent over the next five years to meet government targets.

Furthermore, in order to reach the Environment Agency’s expectations on environmental performance, 18,000 actions by water firms must be fulfilled over the next five years, accounting for £27 billion of the £47 billion expected to go towards enhancements.

But of the 8,780 actions completed in the last five years, just one per cent have had site inspections carried out by the agency.

Environmental damage is also a cause for concern, with the use of storm overflows increasingly coming under fire over the last few years, with companies seemingly releasing untreated sewage into waterways without much thought to the consequences… or the legalities.

Both Ofwat and the Environmental Agency are taking enforcement action against companies over their management protocols, but there is currently no single regulator responsible for inspecting wastewater assets proactively in order to prevent further harm being caused to the environment.

All this and more has led the NAO to conclude that regulators no longer have a solid understanding of the condition of infrastructure assets, since they don’t have a set of metrics in place to carry out assessments of such.

It was found that over the last four years, water companies have overspent and made slow progress on essential work… and it would take 700 years to replace the entire water network if this current rate is maintained. As such, it is perhaps unsurprising that this latest report has also revealed that consumer trust is now at an all-time low.

The report recommends that Defra understands the costs and deliverability of its plans, as well as what potential impacts they might have on billpayers. Gaps in regulatory responsibilities must also be addressed, with regulatory bodies all collaborating to build consumer trust back up and improve investor confidence.

Head of the NAO Gareth Davies said: “Given the unprecedented situation facing the sector, Defra and the regulators need to act urgently to address industry performance and resilience to ensure the sector can meet government targets and achieve value for money over the long term for billpayers.”

Overinflated costs

This comes after watchdog Ofwat confirmed that it is now looking into data suggesting that water suppliers are overinflating the costs of infrastructure upgrades, spending significantly more than operators overseas… which, if true, has the potential to damage consumer trust in the sector even further.

For example, campaigners Windrush Against Sewage Pollution research shows that Oxford-based sewage works upgrades would cost £435 million, but a new sewage works in Assens in Denmark would cost £29 million, despite the fact that the cost of living in the country is 13 per cent higher than it is in the UK and where water costs are among the highest in Europe.

Help with water bills

All of this and more means that both domestic and business water bills will increase over the next five years – and, likely, even longer than that.

Water can be a particularly significant overhead for companies, depending on the size and nature of their business, and with bill hikes coming into effect, it’s more important now than ever to find ways to keep costs down.

One of the best ways to achieve savings on water bills is to consider switching water supplier.

An audit of your site will be carried out to identify weak areas across your site, helping you to bring in appropriate water-saving solutions and change them over time as your business needs evolve. If you’d like to find out more, get in touch with the H2o Building Services team today.