Water: Tougher regulation will attract ‘global investment’, Steve Reed claims

Steve Reed has claimed that toughening up water regulation will “attract global investment” to rebuild the UK’s sewage and pipeline infrastructure.

The environment secretary today insisted his efforts to reform the under-fire industry—including the threat of prison time for rogue water bosses—would create “growth and opportunity.”

It comes after Reed unveiled the Water (Special Measures) Bill in Parliament yesterday, which ramps up watchdogs’ powers to issue fines, conduct oversight, and recoup the costs of investigations.

And speaking at the Thames Rowing Club in Putney, west London, on Wednesday, the minister vowed: “By strengthening regulation and enforcing it consistently, we will create the conditions needed in a well-regulated private sector model to attract the global investment required to rebuild our broken water infrastructure.

“A sector that has been associated with decline and cover ups will become one of growth and opportunity.”

He added: “It will unlock the biggest ever investment in our water sector, and the second biggest private sector investment into any part of the economy for the entirety of this Parliament.

“Water companies need to attract the levels of private investment required to upgrade crumbling infrastructure and keep pace with population growth.”

Investment projects such as insurance firm Aviva’s award of £21m to the Wildfowl and Wetlands Trust (WWT) to restore coastal saltmarsh in a bid to combat climate change and create natural flood defences could be examples of the types of schemes being mooted.

The government will now launch a wider review of the water sector, involving economists, campaigners and the industry, to determine how to attract the cash it says the sector needs.

He said it would include funding for future-proofing projects, including nine new reservoirs, large-scale water transfer schemes, 8,000km of mains pipes, and upgrading 2,500 storm overflows. It will also create “tens of thousands of jobs” and boost supply resilience.

Further details on the scope and parameters of the probe are expected this autumn.

An official indicated that the department has not yet set out a timeline for when the review will deliver its findings, but there is understood to be a sense of urgency.

It comes as the industry’s trade body WaterUK has warned that regulator Ofwat’s recent PR24 draft determinations could “reduce the UK’s attractiveness to international investment”.

The watchdog wants to see water companies cut a record £17bn from their £105bn investment proposals and limit the rise in household water bills to £19 a year, or 21 per cent, over five years based on the plan—a total of £94—before inflation. Thames Water customers would pay an extra £99 by 2030.

According to Water UK, firms fear this could prevent suppliers from raising the sufficient equity required to invest in improving performance, sewage leaks, and infrastructure.

A final decision on the proposed cap is due in December as part of the price review 2024 (PR24) process.

Water infrastructure upgrades are funded by a mixture of private investment and income from customers’ bills.

But talking to journalists, Reed confirmed: “All the investment that is required for upgrading our water infrastructure will come from the private sector.

“In the draft determination, where Ofwat got up to with the initial proposals, it will be £88bn. It may vary from that but it will be of that order… and the money starts to come on stream from April of next year.” 

Asked whether he would ask the regulator to reconsider, Reed said: “There’s currently a negotiation going on between the water companies and Ofwat, so you would expect them to make those kinds of comments.

“There will be a significant amount of tens of billions of pounds into the water sector. The precise amount will be determined by Ofwat towards the end of the year.”

Mike Keil, Consumer Council for Water (CCW) chief executive, said: “Consumer trust in the water sector has been badly fractured by concerns over the environment.

“We’re also looking forward to working with ministers to give people and communities a more powerful platform to hold companies to account when they fail to deliver on their promises. 

“These changes will complement the work we’re already doing to help transform the culture of companies, so they are focused on providing the best possible service for customers.”

A Water UK spokesperson said: “We agree with the government that the water system is not working.

“Fixing it requires the government to deliver the two things which it has promised: fundamental regulatory reform and speeding up investment.

“Ofwat needs to back our £105bn investment plan in full to secure our water supplies, enable economic growth and end sewage spilling into our rivers and seas.”