Water companies will bring forward £440 million worth of work as part of efforts to limit the impact of ‘rollercoaster-like’ peaks and troughs of investment in the sector.

As part of the price review process, sector regulator Ofwat is currently working to determine how much each water company will be allowed to charge its customers for the services it will deliver in the five year control period from 2015. This includes a view of the level of efficient investment the companies will be funded for within the period.

In the past the changeover between these five year periods has been accompanied by a significant drop-off in workload. This has dramatic consequences for the supply chain with sector trade group British Water suggesting that as many as 40,000 workers are laid off as a result of this trough in investment.

Last year Ofwat gave water companies the opportunity to include so-called ‘transition investment’ in their business plans for the period from 2015 to 2020.

This allowed companies to bring forward spending into 2014 without suffering penalties within the Capital Incentive Scheme (CIS), helping to mitigate the depth of the slump. Many water companies have chosen to finance the cost of accelerating these works, recognising the efficiencies that will arise as a result of doing so. While the water companies business plans were submitted in December last year, the precise amount of investment brought forward was not communicated by Ofwat as this would have been inappropriate within the early stages of the price review.

However earlier this month the issue was raised as a written question in the House of Commons. Answering the question, Parliamentary Under-Secretary for the Department for Environment, Food and Rural Affairs Dan Rogerson revealed that the total requested transition investment was £440 million.

Since 2013 a cross-industry group has worked with Ofwat and HM Treasury to implement the recommendations of a report looking at the root causes of cyclicality in the water sector. The group promoted the transition investment approach in its responses to Ofwat’s consultation last year on business planning.

The group’s chairman Richard Coackley comented:

“At a time when we are looking to deliver outstanding water infrastructure while reducing the costs to the consumer, we must take every opportunity to tackle waste in the sector.

“The boom-and-bust in investment and employment that occurs every five years in the water sector cannot be efficient. We are extremely pleased that Ofwat agreed to introduce the transition investment programme, and we are overwhelmed by the level to which it has been taken up."

“This will support the continued employment of workers across the industry that might otherwise be lost as we close out the current price review period. It will also ensure that the industry is able to get off to a flying start in 2015, building upon work that we have been able to bring forward through this programme”.