Expert analysis of the UK water sector
Excerpts from the latest edition of The UK Water Report.
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Is trust bust?
Despite years of repair activity, the public narrative on water is through the floor. We asked The Water Report Expert Forum, is trust salvageable?
By Karma Loveday
Virtually every water event of the last few years has, at one point or another, alighted on the question of public trust, and how to recover the sector’s reputation, especially in England and Wales. Efforts have included Water UK’s 2023 apology for sewage spills; the announcement in 2024 of a £100bn+ investment programme to set us on course for a higher performing future; and the Cunliffe Commission’s ‘once-in-a-generation’ structural reset recommendations.
Yet in September, the prime minister told the country at the Labour conference that “Water is a symbol of what has gone wrong with Britain,” and CCW reported complaints to water companies in 2025/6 had soared by an unprecedented 56%.
This month, we asked The Water Report Expert Forum about the current state of trust in water and realistic prospects for its recovery.
To start, do Forum members think public trust in the water industry is improving? No one said yes, a third thought the trust is staying about the same and over two-thirds that it is getting worse.
We also asked the Expert Forum what trajectory it envisages for public trust over the next few years. There was little optimism; 79% said it will either stay the same or get worse. Most of the rest were unsure, with only a small minority expecting improvement.
Does the Expert Forum expect trust to return to a positive level, ultimately – and if so, by when?
Understandably, there was lots of uncertainty here because of the many moving parts in play, as epitomised by this contribution: “Maybe all going well by 2040... But it could be broken beyond full repair, just like the banks are still struggling with trust post 2007, which is almost 20 years ago.”
There was, though, considerable agreement about the doom loop that will result from further prolonged depressed trust in the water industry. One Forum member summarised: “Prolonged low trust in the water industry would have consequences well beyond customer sentiment. It would affect regulation, investment, workforce, public policy and the sector’s social licence to operate. The effects compound over time, so the cost of waiting grows.”
Elsewhere, the Expert Forum unpacked differences between companies, and what might be done by the industry and others to improve the situation.
"Maybe all going well by 2040... But it could be broken beyond full repair, just like the banks are still struggling with trust post 2007, which is almost 20 years ago."
Uncertainty = cost
Moody’s warns investor confidence will weaken and risk increase if water reform delays persist.
By Verity Mitchell
Moody’s issued a warning on regulatory uncertainty ahead of its annual water conference last month. The rating agency noted that timelines have slipped and regulatory uncertainty persists. Revised strategic direction to the existing regulators has been limited. Time is increasingly constrained, given that the methodology for the 2029 price review will need to be consulted on during 2027. Further delays could weaken confidence in the future regulatory framework and implementation timetable.
The consequence of this uncertainty is that any increase in business risk will require stronger financial ratios to maintain credit quality. Moody’s set out the negative progression of more stringent credit metrics needed to achieve a particular rating. The sector’s rating has fallen from Aaa to A in terms of stability and predictability. For a Baa1 rating, adjusted interest cover has increased to greater or equal to 1.4x from 1.2x, and regulatory gearing requirements fell from equal to or lower than 75% to 68% between pre May 2018 and post November 2024.
"Any increase in business risk will require stronger financial ratios to maintain credit quality."
Let rain reign
Only Rainwater into Windermere puts forward a beyond compliance ‘one and done’ plan to restore England’s biggest lake. The work demands attention on many fronts.
By Karma Loveday
There are many remarkable things about Only Rainwater into Windermere (ORiW) – a feasibility study, delivered by a coalition of interests (United Utilities, the Environment Agency, Lake District National Park Authority, campaign group Save Windermere, the Love Windermere coalition and Westmorland and Furness Council) after 15 months of work, which concludes that it is technically possible to remove wastewater inputs and highway runoff and create a future where only rainwater enters Lake Windermere.
The proposed solution involves building 138km of new sewerage network to intercept discharges from the ten wastewater works, 1800 septic tanks and 89 package plants around the lake. The private infrastructure serves not only homes but also hotels, campsites, farms and other businesses. This would involve connecting around 12,800 people to public sewers for the first time. Much of the tunnelling work would be done underground to minimise disruption.
The wastewater intercepted would then be transported away to a new state-of-the-art treatment works, where discharges to the receiving waters would be among the highest quality in Europe. There are two potential sites for this at present – via Ulverston or via the River Leven.
But the scheme goes beyond being a new super sewer; there would be interventions across the whole catchment to deliver the ambition of only rainwater entering the lake, including 35km of highway runoff interception (including for all A-roads) and 37 hectares of sustainable drainage. In total, wastewater infrastructure across the catchment would increase by up to 75%.
This total catchment approach is necessary to support Windermere’s ecological recovery.
ORiW is priced at around £3.7bn and would take seven years from 2030 to complete, assuming funding in AMP9. If paid-for only by United Utilities’ customers, the price tag would be £3.17 a month per bill. Under a national funding arrangement, it would cost just 35p per month per bill-payer across England. ORiW exposes a core funding question that is relevant for a number of strategic assets currently under consideration: should only local people pay?
"ORiW exposes a core funding question that is relevant for a number of strategic assets currently under consideration: should only local people pay?"
SDG6 shake-up
World Water Congress co-presidents Peter Simpson and Alex Plant on the Glasgow Framework and unlocking the potential of private investment in water and sanitation.
By Karma Loveday
Getting thousands of global water professionals and enthusiasts together for a week of in-depth discussions and networking is always going to result in action. Ideas will be generated, new connections made, and follow-up activities scrawled on international to-do lists.
But the core ambition of the UK leadership team behind the International Water Association’s World Water Congress – hosted so ably in Glasgow last month – was more urgent. It sought action that would, if delivered, actually change lives. This was an effort ten years in the making, since the UK team put in the bid to host.
At the heart of the Congress, and running through many of its activities, was the overriding aim to make a difference for the 2.2bn people in the world without water and the 3.4bn without adequate sanitation. The strategy behind the aim was to unite global momentum to step up delivery of SDG6 (as evidenced by next month’s UN Water Conference and the World Bank’s Water Forward programme), with pragmatic tools to actually enable that to happen.
Step forward the Glasgow Framework – a strategy seeking to make private finance for water and sanitation politically irresistible to governments, and financially attractive to investors – ultimately to substantially narrow the minimum $114bn a year SDG6 funding gap. That hinges on two things: strengthening the systems surrounding investment – policy, governance, regulation and data; and shifting the narrative to recognise that the benefits of water security extend far beyond water outcomes. Congress co-president and chair of WaterAid’s Resilient Water Accelerator Peter Simpson says: “Water security is not simply about preventing disease. It is also a foundation for equality, economic prosperity and sustainable development.”
Congress co-president and Scottish Water chief executive Alex Plant qualifies: “The point is not that private investment can replace public funding in every circumstance. It is that we need to bring private capital into the places where it can help close the gap – and use public money where it is most needed.”
"Water security is not simply about preventing disease. It is also a foundation for equality, economic prosperity and sustainable development."
Southerly direction
WRSE and partners propose a pilot and long-term configuration for multi-sector water and environmental planning for South East England.
By Karma Loveday
Water Resources South East (WRSE) has made a proactive contribution to the debate on how regional water system planning should be taken forward in its operational area. It is well placed to do so: intensely familiar with the region’s two river basin districts from its water resources planning heritage, and with the area’s wider characteristics, stakeholders and communities. Looking at the water environment as well as water supply is new territory. But with a detailed plan still awaited from Defra, WRSE is well placed to expand its repertoire and keep things progressing.
Hence it commissioned Arup and Frontier Economics to develop a practical approach for implementing multi-sector regional water and environmental planning in the South East of England. The resulting report, published last month, follows Defra’s steer in suggesting a pilot from which lessons can be drawn. Meyrick Gough, WRSE’s managing director, explains: “They want to get some learnings from the different regions, because everyone is proposing something subtly different. Each of the regions has different challenges and different make-ups.”
But the report also goes further to suggest a long-term configuration for regional planning – albeit final policy choices, legislation and devolution arrangements are yet to be confirmed.
"With a detailed plan still awaited from Defra, WRSE is well placed to expand its repertoire and keep things progressing."
Upward and onward
CFO Stuart Ledger sees green shoots for Southern Water’s turnaround in recent credit rating uplifts – but appreciates operational and financial progress must be maintained.
By Karma Loveday
Ofwat’s newly published Monitoring Financial Resilience report left Southern Water in the bottom ranked ‘action required’ category. But crucially, the regulator acknowledged the company has made progress in strengthening its financial position in the past year.
And it has. There is evidence of committed shareholder support, improving operational performance, improved credit metrics and a more positive price control outcome post appeal.
The shift has been formally recognised recently by all three major credit rating agencies.
For chief financial officer Stuart Ledger, this is very welcome progress and comes on the back of a lot of hard work. But he knows there is much more to do. “We are still in turnaround,” he says. “It’s going to take time.”
"We are still in turnaround. It’s going to take time."
Unlocking ownership options
David Lloyd Owen reflects on his evidence session to the EFRA Committee on water ownership models.
By David Lloyd Owen
The Environment, Food and Rural Affairs Committee’s meeting on the future ownership status of the English and Welsh water companies featured six MPs asking a useful series of questions which spurred some detailed and interesting responses.
Topics included: what the Glas Cymru experience tells us; Scottish Water as a comparator; international insights; public trust in privatised utilities; the point that climate change and population growth were not seen as concerns at the time of privatisation; and the impact of the ownership models on the English water companies. The final session saw academics associated with re-nationalisation campaigns pitted against the CEO of Water UK.
Differences of opinion and interpretation were inevitable in the session. What was intriguing was the essential tension between those calling for the sector’s renationalisation and the way this would be brought about. Scottish Water was constantly cited as a public ownership exemplar, yet its evolution over the past three decades has taken it away from the local authority approach, into an integrated national model, within a formal regulatory framework based on a formal series of six-year asset management plans. Where does this fit in with an (in effect) unregulated (legal standards and so on notwithstanding) collective of local authority-controlled entities, presumably within their current operating boundaries?
Support for the current state of affairs was tepid at best. Continued private sector ownership can only be justified under a fundamentally redrawn regulatory settlement from 2030. Here, it will be interesting to see what hybrid offerings are suggested, especially in introducing fresh layers of accountability, which were teasingly hinted at in Cunliffe.
"Continued private sector ownership can only be justified under a fundamentally redrawn regulatory settlement from 2030."
Glass half full
Thames Water shares lessons and benefits as it reaches the halfway milestone with its business smart meter rollout.
By Karma Loveday
Thames Water launched three new initiatives to help businesses save water and money, as it marked the milestone of more than half (90,000 out of 170,000) of all non-household (NHH) meters in its area now using smart technology. The company is fitting around 2,000 business smart meters a month.
Rosie Rand, NHH programme delivery manager, says Thames has been sharing what it has learned along the way. Key is the greater complexity in the NHH market. “There's a whole heap of different considerations. Is it a water sensitive business? How much storage have they got on site to be able to turn the water off? Do you have to do it out of hours? What type of meters do they want? Do they need to be able to log them or include them into their building management system? So the cost per meter exchange is significantly more than the household programme, not only because it's a bigger meter, but because of the complexities of that.”
A good rule of thumb is to raise more jobs than you expect to be able to complete, to build flexibility into the delivery programme. “Retailers understandably want to give their business customers a clear idea of when their meter will be exchanged, but giving an exact date isn’t always easy. That’s why good communication and collaboration between retailers and wholesalers is so important.”
Rand highlights another “overarching challenge”: that businesses are not direct customers for wholesalers. Being a step removed from the customer relationship means lack of influence over how the customer responds to the smart meter once it is installed. Aside from the continuous flow alerts that Thames provides where this is found, “The outcome that a business gets from a smart meter all depends on what the retailer offers them.” And that can be very varied.
Rand argues: “The market needs a baseline code requirement setting out what retailers must provide to businesses once granular smart meter data is available through the Smart Meter Read Hub. At a minimum, businesses should receive continuous flow alerts and be able to view their daily or hourly consumption through their billing platform.”
"The market needs a baseline code requirement setting out what retailers must provide to businesses once granular smart meter data is available."
Second use first
Chris Payne makes the case for industrial reuse before new supply.
By Chris Payne, co-founder and director of PureTec Separations
By mid October, national reservoir storage was at 54% of capacity, around 21% below the long-term average. Parts of six areas were in severe drought and ten areas in drought. There were 449 restrictions on abstraction licences, and another 1,383 licence holders had cut abstraction by half voluntarily.
For an industrial site, that makes one thing plain. The most secure supply on the premises is the water that’s already come through the gate. It needs no licence and no drought permit. The technology to use it twice has existed for years. What’s thin is the reason to buy it.
Most sites have done the first round of leaks, nozzles, clean-in-place timing and operator habits. On the sites we see, that first pass can take up to half off consumption. Breweries that ran above four litres of water for every litre of beer now run below three. That work takes months.
What’s left is process, and process takes years. It needs a change in thinking, changes to plant, a capital budget and a payback case.
Our advice is: audit what leaves each stage and at what quality. It’s the first thing we look at on any site we survey, and it’s usually where the cheapest litre is. Size any reuse for the demand that exists today, not the demand a drought might create. Start with the lowest-quality use and the stream that already meets it. And put someone's name on the water between stages, because until it has an owner it will keep going to drain.
"The most secure supply on the premises is the water that’s already come through the gate."
CONTENTS
This month's articles
Expert Forum
Is trust bust? - The Water Report Expert Forum on whether public trust in water is salvageable
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Report
Uncertainty = cost - Moody's warns investor confidence will weaken and risk increase if water reform delays persist
8
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Feature
Let rain reign - Only Rainwater into Windermere puts forward a beyond compliance 'one and done' plan to restore England's biggest lake
10
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Industry Comment
A risk left behind? - Sharpe Pritchard and Frontier Economics ask who manages system resilience in an unbundled water future
14
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Industry Comment
Water reform needs more than a new map - Penny Hodge champions meaningful participation in regional planning
18
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Feature
Steps to water security - David Hinton reflects on the essential ingredients for a more resilient system
20
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Report
Tougher targets take their toll - tighter thresholds see EPA score decline, while almost half struggle with AMP8 year one delivery
22
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Interview
Upward and onward - Southern Water CFO Stuart Ledger sees green shoots for the company's turnaround in recent credit rating uplifts
24
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Feature
Unlocking ownership options - David Lloyd Owen reflects on his evidence session to the EFRA Committee on water ownership models
26
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Feature
SDG6 shake-up - World Water Congress co-presidents Peter Simpson and Alex Plant on the Glasgow Framework and unlocking private investment in water and sanitation
30
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News Review
Northumbrian retains top spot as C-MeX scores fall
35
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News Review
River restoration offers 7-1 cost benefit
36
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Industry Comment
Norfolk broadside - Dr Gabriel Connor-Streich urges scrutiny of the first nutrient EDP before the approach is repeated elsewhere
37
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News Review
Thames recruits Labour peer as chair designate
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News Review
Water UK calls for mayoral powers to cover water infrastructure
39
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News Review
Three-quarters of Ofwat staff vote to strike
39
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News Review
Firms predict $400bn hit from water impacts
40
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Industry Comment
Second use first - Chris Payne makes the case for industrial reuse before new supply
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Report
Glass half full - Thames shares lessons and benefits as it reaches the halfway milestone with its business smart meter rollout
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Report
2025/6 ODIs reward six and penalise ten - Ofwat publishes draft performance penalties under its Outcome Delivery Incentives regime
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Report
PR29: a critical bridge - the next price control must support a purposeful transition to a reformed framework, not tinker at the edges
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Report
Financial health check-in - equity injections bolster firms but only two move financial resilience category
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Feature
Southerly direction - WRSE and partners propose a pilot and long-term configuration for multi-sector water and environmental planning for South East England
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Report
Have we pressed pause on the drought playbook? - severe drought and still no NEUBs: are our traditional tools fit for purpose?
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Report
40% of the industry off-track with OPs in first year of AMP8 - Ofwat's Water Company Operational Performance report for 2025-26
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Report
Few EPA stars shine bright - tightening standards see the industry secure fewer than half the stars available in the 2025 Environmental Performance Assessment
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Analysis
Scottish Water as a comparator - how Scotland's publicly owned utility stacks up against the English and Welsh companies
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Industry Comment
Regional power, but no single blueprint - James Cattermole on why the need to plan around the geography of water will endure
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Feature
Glasgow: a glowing performance - a flavour of what was on offer at the World Water Congress
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News Review
Thames shortlists three for White Horse main works
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News Review
Scottish Water holds top spot with the supply chain
36
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News Review
Tideway cuts spills by 86%
38
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News Review
Pennon: the end of overpromising and underdelivering
38
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News Review
Industry pushes back on price re-opener
39
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News Review
Campaigners criticise trade effluent system
40
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News Review
Carlsberg Britvic launches water replenishment partnership
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Industry Comment
The elephant in the (wash)room - Phill Mills on how replacing 10% of urinals with waterless versions could meet 20% of the non-household demand reduction target
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