Expert analysis of the UK water sector
Excerpts from the latest edition of The UK Water Report.
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Report | Regulation
No time to lose
AMP8 has got off to a slow start, and the clock is ticking if effective delivery is to stand a chance.
One month in to AMP8, and the word on the street is that water work programmes already look set to be at least six months behind an ideal schedule.
Supply chain companies are reporting a lull as they wait for water companies to release work. Albeit this is not without exception, the overall sense is that the industry hasn’t really acknowledged this is a burning platform yet.
The supply chain is used to slow starts. But the hope was that AMP8 would be different, given the heady mix of:
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An unprecedented £104bn spending programme, the magnitude of which was signalled by Ofwat well before the actual number crystallised. While the investment has been approved, the challenge to secure a sufficient number of people, products and services to deliver the work remains, amid a climate of skills shortages and rising costs.
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Lessons from backlogs in 2020-25.
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The sting of AMP7 under-delivery penalties, combined with the prospect of higher AMP8 targets and incentives.
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The context of falling customer satisfaction, higher bills and increased public scrutiny.
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Mega infrastructure projects in the mix.
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However, some are unconvinced that traditional patterns will be broken, and the first few weeks of the AMP have done little to allay fears. Anything like a business-as-usual start to AMP8 should be unthinkable, given all the factors listed above.
By Karma Loveday
Anything like a business-as-usual start to AMP8 should be unthinkable.
NAO | Review
Back to basics
The National Audit Office issues route one recommendations for Defra and regulators.
By Karma Loveday
The public spending watchdog’s audit of Defra, Ofwat, the Environment Agency and the Drinking Water Inspectorate has resulted in a series of recommendations that should be humbling in their simplicity. These include not setting targets before understanding whether they are deliverable and what they will cost customers; delivering a coherent national system plan for water, including balancing trade-offs between different duties; developing a common understanding of asset health; and ensuring the sector is investible at the scale needed.
Regulating for investment and outcomes in the water sector amounted to a blistering criticism of water policy and regulation from PR14 to PR24.
The National Audit Office’s report, Regulating for investment and outcomes in the water sector, amounted to a blistering criticism of water policy and regulation from PR14 to PR24. The accompanying press release cited a series of failures, including: failure to deliver a trusted and resilient water sector; failure to drive sufficient investment, leaving us exposed now to the cost of multiple catch-up projects as well as environmental and security of supply risk; failure to manage risk, ultimately resulting in higher costs for customers; and failure to drive up performance in key metrics including mains bursts, supply interruptions and pollution incidents.
Times have changed since Tideway was approved. It’s still a good model, but the markets are different, regulation is different, the water companies are different, the public perception is different.
Interview | Nevil Muncaster
From super sewer to super storage
Nevil Muncaster reflects on learning lessons from the Tideway financing model for SESRO and other major infrastructure.
By Karma Loveday
A couple of months ago, a plan 25 years in the making came to fruition as the final connection was made to join London’s brand new super sewer to Thames Water’s wastewater network. Nevil Muncaster, engineering and asset management director at Thames Water, explains that between now and around the end of the year, final commissioning and testing will take place.
The project has been delivered on time, without significant cost overrun and with the promised benefits to investors and communities, despite the inherent engineering complexity of tunnelling under the capital.
In addition to delivering the fundamentals, the project has successfully innovated in multiple ways. Crucially, it has acted as a pathfinder for delivering major schemes under the Specified Infrastructure Project Regulations (SIPR). The Tideway financing model – designed to reduce cost through competitive tendering while astutely managing risk – features private finance, a bespoke regulatory framework and licence, a reliable revenue stream from Thames Water customers, and an alliancing agreement for delivery. Use of the model is credited with reducing the bill impact of the project from an estimated £70-80 per household, to around £25 per year.
The team is brimming with lessons from this experience, and Thames Water will be putting these lessons to good use as it develops the South East Strategic Reservoir Option (SESRO) – the mega-reservoir near Abingdon in Oxfordshire. It plans to progress the development under SIPR, and to deploy a similar model as used for the Tideway Tunnel. A carbon copy is not possible, because the project is fundamentally different in nature and involves three water companies rather than one.
Muncaster makes a further observation: “Times have changed since Tideway was approved. It’s still a good model, but the markets are different, regulation is different, the water companies are different, the public perception is different. I'm sure these things will change the profile when we go to contract or go out to tender. Notwithstanding that, the feedback we're getting from the market is of immense interest, and the engagement we're doing will allow us to shape the model to suit what is required today, as opposed to what was appropriate ten years ago.”
CSO | Spill Data Analysis
Did 2024’s CSO data dampen expectations?
David Lloyd Owen finds the latest EDM data wanting.
By David Lloyd Owen
“To everything there is a season” – which now includes the annual Event Duration Monitoring (EDM) data for Combined Sewer Overflows (CSOs) at the end of March. This year, we were braced to expect the worst, given another wet year. The sector did not disappoint, at least when it comes to headlines.
It is sadly evident that limited material progress has been made towards addressing the causes of these overflows. That is to some degree understandable, given that Ofwat did not consider this a cause for concern when setting out its spending priorities for 2020-25.
Going into the data in some detail does present a more nuanced picture. However, one of the recurring points here is that when exposed to external scrutiny, company self-assessments have been found wanting. Data which would have once been readily accepted is now seen in a cooler light. It is essential that a degree of trust can be reestablished. That can only come from companies and regulators working towards a common goal.
Companies are obliged to explain why each EDM which provides data for less than 90% of the time is underperforming. Perhaps they need to provide more specific reasons for their spillage failures. Trust is hard to win and easy to lose. The winning needs to begin.
It is sadly evident that limited material progress has been made towards addressing the causes of these overflows
Social tariffs must be tailored to reflect the specific needs of local communities.
Interview | Sukhvinder Kaur-Stubbs, Thames Water Customer Challenge Group
Custom-made
Affordability, fairness, performance improvement and a real say – Sukhvinder Kaur-Stubbs explains that Thames Water’s CCG has put core customer priorities at the heart of its Cunliffe submission
By Karma Loveday
Arguably, the Cunliffe Review’s purpose is as much to restore trust in water as to recommend the reforms that will help get us there. With that in mind, the views of water customers and the wider public should have particular significance as the Independent Water Commission embarks on the unenviable task of going through all the evidence that has now been submitted.
Sukhvinder Kaur-Stubbs chairs Thames Water’s independent Customer Challenge Group (CCG).
Referring to her group’s submission to the Cunliffe Commission, she says: “We’ve tried to be realistic, to think about reform but also about responsibility. What’s guiding us are our principles. We know customers want fairness as well as affordability; they don't want the can being kicked down the road. They want to think about what is a smart investment now and for the future. And customers want to be heard in ways that actually shape outcomes and don’t just get buried in panels and pilots. So we've focused on a number of very practical solutions.”
These are as follows:
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Tailor social tariffs – “Social tariffs must be tailored to reflect the specific needs of local communities,” Kaur-Stubbs asserts. The CCG’s particular concern is that Thames Water customers should not be worse off if a single national social tariff is imposed.
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Make charges more fair – the group would like to see the benefits of smart meters being maximised through the introduction of innovative tariffs designed to support affordability and drive water efficiency.
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Put penalties to work – Thames Water regularly attracts performance penalties. The CCG would like to see the money put to better use than at present. “If penalties can be reinvested into performance improvement, that has to be in the interests of customers,” she asserts.
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Strengthen CCGs – Kaur-Stubbs is firmly of the view that the best route forward is to strengthen the framework in which independent CCGs operate, rather than to reinvent the wheel.
Report | Storm overflow
The dirty job of getting cleaner
2024 storm overflow data shows flat performance, as changes coming from the EA on pollution reporting will make things look worse before they get better.
By Karma Loveday
The sector took another hammering when storm overflow data for 2024 was released at the end of March, with environment secretary Steve Reed describing it as “disgraceful” and The Rivers Trust highlighting “no significant progress”.
There was in fact a 2.9% decrease in spill numbers to 450,398 compared to 2023, and the average number of spills per overflow was down from 33.1 to 31.8. But spill durations were up marginally (0.2%) and totalled 3,614,428 hours across the year.
In their commentaries, Defra and the Environment Agency highlighted forward factors that should lead to better future results, including the £10.2bn being spent across 2025-30 on storm overflow improvements; new storm overflow policy and Storm Overflow Assessment Framework guidance; deterrents in the Special Measures Act; and more active inspection and enforcement. Those factors should lead to storm spill improvements in the years ahead.
However, things will likely seem worse before they get better in the public perception as far as wider water company pollution is concerned, in light of changes to guidance on reporting and recording pollution incidents that have just been consulted on by the Environment Agency.
The changes are designed to increase transparency, simplify the reporting and categorisation process, and improve consistency – so the Agency can capture a more accurate picture of water company incidents and their impact on the environment. But ‘more accurate’ in this context will equate to ‘worse in appearance’, even if actual performance remains stable or improves.
There are three key changes:
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Dry day spills from storm overflows will be classed as pollution incidents and must be reported on as incidents on a monthly basis by companies.
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Water companies’ ability to use ‘no impact’ claims to have Category 3 water pollution incidents downgraded to Category 4 incidents, will be removed.
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Water companies will be required to report all water pollution incidents, no matter how small.
‘More accurate’ data will equate to ‘worse in appearance’, even if actual performance remains stable or improves.
Competition Watch
Report | Performance
Cool heads prevail
Keeping data centre servers cool could require 400bn litres of water a year by 2050. Amidst growing concern, Phillip Mills looks at cost-sensitive water saving strategies.
By Phillip Mills, Director of Policy Consulting Network
Data centres are the backbone of the UK’s digital economy, supporting cloud computing, artificial intelligence and the Internet of Things. However, their operational demands – particularly for water and power – pose significant environmental challenges.
This report examines current water use by UK data centres, projects its increase to 2050 driven by technological and economic trends, and proposes water-efficient solutions for new facilities, mindful of the nation’s costly energy landscape.
Assuming a linear correlation between capacity and water use, a doubling of data centre numbers and a 50% increase in per-MW consumption (due to denser racks and warmer climates) could see annual water use rise to 300-400bn litres by 2050 – three to four times current levels. In water-stressed regions like London and the South East, this could strain supplies.
High power costs complicate water efficiency. Air-based or fan-driven systems reduce water use but increase electricity demand, raising operational expenses by £50,000-£100,000 annually per MW at UK rates. Liquid immersion cooling, while water-efficient, requires costly retrofits and power for circulation pumps. Balancing these trade-offs requires site-specific analysis – water-scarce south east England may prioritise closed-loop systems, while energy-rich Scotland can lean on free cooling.
The thirst of data centres demands urged action. By integrating appropriate solutions, the UK can sustain its digital economy without exacerbating water stress, setting a model for global data centre sustainability.
The thirst of data centres demands urged action
Report | Performance
Water saving central
Businesses would welcome a centralised, retailer-neutral water efficiency incentive scheme.
By Karma Loveday
Business customers – particularly those in the public sector – would welcome a centralised incentive scheme to support the installation of water-saving products in their domestic-type settings, such as taps and toilets.
That’s according to a new research report from Waterwise, Wave and Weir The Agency, supported by the Market Improvement Fund. From a small number of in-depth interviews, including with those from the public and charity sectors, commercial retailers, hospitality, finance and manufacturing, the team found:
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There is an appetite for a centralised, retailer-neutral incentive scheme to support the installation of more water-efficient products; all interviewees found the current patchwork of incentive schemes difficult to understand and connect with.
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Any new centralised scheme would have to be well promoted, with national publicity, given the poor levels of awareness of existing schemes amongst interviewees.
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There was a preference for any new scheme to be run by the government or an independent organisation rather than a water retailer or wholesaler.
There was a preference for any new scheme to be run by government or an independent organisation rather than a water retailer or wholesaler.
CONTENTS
This month's articles - May 2025
Report
Supply chain waits for work
4
Pg
Report
Corry: rewiring green regulation
8
Pg
Interview
Thames Water's Nevil Muncaster: Tideway to SESRO
10
Pg
Interview
Sukhvinder Kaur-Stubbs, Thames Water CCG chair
14
Pg
Analysis
Dieter Helm's water diagnosis
18
Pg
Analysis
2024 spill data
20
Pg
Interview
Pennon's Dilani Pararajasingam on attracting data talent
24
Pg
Report
Back to basics with the NAO
6
Pg
Report
Speeding up major project delivery
9
Pg
Report
Water UK sets out a package of recommendations for the Cunliffe Commission
13
Pg
Report
Special measures enforced
17
Pg
News Review
Thames selects KKR
19
Pg
Report
Cultural services and river health
23
Pg
Industry Comment
In praise of sponge cities
26
Pg
Competition Watch
Report
Affinity leads on R-MeX as BR-MeX begins
Pg 27
Industry
Comment
Data centre consumption forecast
Pg 28
Report
Businesses want centralised water saving incentives
Pg 30
Industry
Comment
Tetra Pak champions water stewardship
Pg 31