Following a report commissioned by Ofwat from Baringa Partners on how Ofwat's regulation impacts on economic growth which was published in April 2025, Ofwat has commissioned a further piece of consultancy work on the economic growth agenda from consultancy firm KPMG LLP worth an estimated £98,580 (inc VAT).

The UK government has set economic growth as one of its key missions and the water sector regulator now wants to develop a quantitative estimate of the likely economic benefits of the RAPID major projects infrastructure investment programme.

In May 2024 Ofwat's duties (alongside those of Ofgem and Ofcom) were extended to include the Growth Duty – this secondary duty requires Ofwat to have regard to the desirability of promoting economic growth when carrying out most of its work in relation to England.

Given the new Growth Duty and the importance of growth to the UK economy, Ofwat separately commissioned Baringa Partners to produce a report that considered how its work could further the regulator’s contribution to economic growth.

Published in April 2025, the Baringa Partners report set out eight principles for Ofwat to consider when assessing water company investment proposals and their contribution to growth.

• Delivering value for money.
• Encouraging innovation to unlock productivity.
• Promoting corporate, financial and operational resilience.
• Avoiding displacement of investment away from more productive activities.
• Taking advantage of potential positive spillover effects.
• Promoting a long-term focus on sustainable growth.
• Providing opportunities for sector-wide collaboration across various stakeholders.
• Promoting good practice when companies carry out their core functions.

Baringa also put forward seven new areas for Ofwat to consider with the aim of promoting economic growth.

• Considering the impact on the domestic supply chain.
• Stimulating growth by increasing investment in a downturn.
• Addressing imbalances in information and knowledge in the water sector between water companies, customers and supply chain companies.
• Better capturing external costs and benefits.
• Looking at the impacts of water company activities on wider, adjacent markets, such as nature and tourism.
• Considering skills shortages in the water sector
• Building on existing work on cross-sector regulatory alignment in the area of economic growth.

The UK Government has been clear that economic growth is its number one mission and has called upon all regulators to play their part in delivering the mission. In the light of this requirement, Ofwat has asked KPMG to develop a quantitative estimate of the likely economic benefits of the RAPID major projects infrastructure investment programme to help demonstrate its own contribution to the economic growth agenda.

The contract, which runs from 10 June 2025 to 1 August 2025, was a direct award to KPMG without being tendered through a formal procurement process because the expenditure fell below the relevant threshold.

Click here to download the Baringa Partners report