Challenges in the pipeline


waterAside from the periodic review of 2009/10, the water sector has recently enjoyed a low profile. However, this relatively peaceful existence may change. First, England faces a challenging summer to maintain water supplies. Last March was one of the driest months on record, whilst April’s high temperatures saw minimal rain in many regions, especially in East Anglia and the South-East.

Of course, the remainder of May and June may produce regular cloudbursts – to the delight of gardeners if not to farmers. If not, expect far more hosepipe bans and further constraints on water use. However, the situation is very different from the sweltering summer of 1976 – the drought has not yet taken root and the water companies’ £85 billion of investment since privatisation in 1989 means they are now far better prepared.

Appallingly unprepared, though, over the Christmas period was Northern Ireland Water (NIW): its lack of investment in recent decades was amply demonstrated. As a priority, the long-running Northern Ireland water charging saga needs to be resolved. Subsequently, NIW should be privatised so that the necessary investment uplift can be undertaken.

Scottish Water, too, remains publicly-owned - and partly subsidised. Once the new administration is in place, Scottish Water should be transferred to the private sector, preferably with Scottish financial institutions playing a key financing role. Elsewhere in the sector, a White Paper is being drafted by Defra. It is unlikely to put forward radical proposals.

Aside from addressing the Walker Report on water charges, it will also analyse the Cave Report which advocated various initiatives to promote competition. In over 20 years, water competition in England and Wales has made minimal progress – several of the water companies prefer it that way. Ironically, in Scotland, there is more of an open market for water services.

Hopefully, it will rain, preferably at night-time. If not, some water companies are in for a long summer.