80. City Water Debate, Bakers’ Hall, 22 November 2023

Around 100 senior figures from the water and environment sectors and Livery Companies contributed to the debate on the financing of the water sector “Water Liquidity – How to Finance the Required Investment in the UK Water Sector to 2050”.

Key points included:

·         massive investment in the sector is needed to meet our environmental and water supply targets

·         all of us must work to reduce per capita water consumption from 145 to a projected 110 litres per day

·         there is some scope for more, less carbon intensive ‘nature based solutions’, centred on river catchment areas

·         the sector can compete for government funding but significant private investment is required

·         there is a need to change the governance and regulation of the sector

·         the sector needs more pricing stability and consistency

·         all parties need to provide more, better and open communications

 

Participants

Our speakers were:

·         Baroness Brown of Cambridge DBE (Chair - Adaptation Committee of the Climate Change Committee)

·         Graham Edwards* (Founder and Director of Castle Water)

·         Dominic Nash* (Equity Research - Barclays UK)

·         Cathryn Ross (Interim Co-Chief Executive - Thames Water)

·         Colin Skellett OBE (Chief Executive - Wessex Water)

·         Tim Williams (Director - Stantec)

* indicates member of the Water Conservators’ Company

We are deeply grateful to all our speakers and to our sponsors Agilia, Arup, Castle Water, Huber Technology, Mott McDonald, Thames Water and Wessex Water, who made this debate possible.

Background

This by invitation only event, conducted under Chatham House rules, flowed on directly from our previous City Water Debate (21 March 2023) on Governance in the Water Sector and from our ongoing series of webinars on related matters. Our aim is to convene serious debate on a matter of national importance (and to move beyond the sometimes very fractious and partisan approach in parts of the media).

Our speakers gave a scintillating overview of the huge issues and challenges we face as a nation and attendees were left in no doubt about the seriousness of the situation. Views and insights were wide and varied, superbly articulated and respectfully but forcefully argued.

Key Themes

·         massive investment is going to be needed as a country up to 2050 if we are to meet our environmental and water supply targets (perhaps £600bn in total)

o   half of this is likely to be the required renewal of facilities constructed in the period after 1990 as they approach the end of their original design life; this is masked by the fact that current industry accounting conventions seriously underestimate the replacement value of the sector’s assets

o   the other half is likely to be major enhancement investment driven by a range of factors including: the urgent need to address climate change effects (including hotter drier summers and larger more intense storm surges); tackling the issue of combined storm overflows (CSOs) and associated sewage discharge into rivers where the amount spent will depend on our degree of ambition (addressing the most critical CSOs vs a complete re-engineering of our sewerage system); recent population growth; and leakage reduction

o   the above is predicated on the ability or willingness of all of us as consumers to reduce per capita water consumption from 145 to a projected 110 litres per day (whereas actual per capita consumption continues to increase)

·         within that total there is likely to be scope for increased less carbon intensive ‘nature based solutions’ often centred on river catchment areas  (the subject of next March’s debate) but these on their own will not obviate the need for significant investment

·         government funding is limited and the water sector will have to compete with other government priorities (notably health and possibly defence); hence the water sector will be reliant on significant private investment

·         whilst private sector funding has historically been readily available , recent disarray and uncertainty in the sector means this is no longer the case; this is aggravated by the steep rise in interest rates – the long period of cheap debt may be behind us

·         the current structure and governance of the water sector is a construct of the 1990s; there may be ways of changing or modifying this construct to meet current and future challenges (as was highlighted in our March 2023 City Water Debate on sector governance)

All the above and many other points need full and serious consideration by the country as a whole.  I believe that the Water Conservators are providing a service in helping to crystallise the issues.