Water Minister Emma Hardy highlighted the significant challenges and opportunities for the UK water sector in the keynote speech at the British Water Annual Conference in Coventry yesterday.

The Minister told delegates:

“We know that for too long, the water industry has been held back by inconsistent regulation, underinvestment, short term choices, and poor strategic direction.

“It has been left ill-equipped to meet the demands of climate change, a growing population, and sustainable growth.”

She set out the following three reason why this needs to change:

“Firstly, because water is an essential public service. Current and future customers need to have faith in the system that serves them.

“Secondly, because a functioning and resilient water industry is essential to unlock growth across sectors: building the homes we need, serving other essential industries.

“Thirdly, because water is a fundamental part of our natural environment and we are all wholly dependent on it. No part of our economy can operate without it and safeguarding it as one of the most important assets we depend on is vital.”

PR24 - water sector needs to attract “a huge scale of private capital”

Commenting on delivering the PR24 five year investment programme, Hardy emphasised that the sector needs to attract “a huge scale of private capital” and that government and regulators had to work together to strengthen market confidence.

Since Ofwat had published its PR24 final determinations the sector has already raised over £2 billion in new equity, she continued, saying that the water sector remains “a strong investment opportunity, offering long-term value and stability.”

However, she also acknowledged investor concerns, adding that “some companies have not always acted in the public interest” and pointing out that Moody’s had downgraded the regulatory environment twice in the past decade, highlighting inconsistency and lack of strategic direction.

She told delegates that Government would ensure that regulation is stable, predictable, and fair, with a move away from short-term decisions and recognition of the unique challenges faced by individual companies.

“Our goal is clear: a water sector that is financially resilient, operationally effective, and attractive to investors,” she said.

Affordability and customer protection central to delivery, together with properly resourced regulation

Emma Hardy went on to describe affordability and customer protection as central to delivery, referring to the Government’s commitment in the summer to creating a new water ombudsman with legal powers to protect customers in disputes with their water company.

In addition, delivery also relied on “properly resourced regulation” and the Water (Special Measures) Act had given regulators, particularly the Environment Agency, the strongest enforcement powers in over a decade.

The Minister also outlined further measures the Government intended to take, saying its response to Sir Jon Cunliffe’s recommendations would be set out in a full White Paper which would set out the Government’s vision for a reformed water sector that delivers better outcomes for customers, investors and the environment.

Delegates heard that as part of fundamental reform of the UK water sector, the Government’s plan to establish a “single, powerful regulator” would be created through new primary legislation – the Water Reform Bill – which the Government is aiming to introduce early in this Parliament.

Until then, existing regulators would continue their duties, supported by enhanced powers under the Water (Special Measures) Act and early steps would also be taken to improve coordination, including joint enforcement efforts to align regulation and delivery.

Referring to the Government’s Water Delivery Taskforce, which is chaired by the Minister, Emma Hardy said she intended to work with the sector to ensure that the commitments set out in their business plans are delivered and that “regulations support investment in improvements rather than preventing it.”

Government looking to consider best approach to drive efficiency and innovation in project delivery through competition more widely

The speech also highlighted that competition will remain an important tool for driving value and that for major infrastructure projects, such as new reservoirs, the Government will continue to use the Specified Infrastructure Project Regulations (SIPR), following the successful model used for the Thames Tideway Tunnel.

In addition, she told the conference:

“We are also looking to consider the best approach to drive efficiency and innovation in project delivery through competition more widely.”

Winding up the speech, Hardy referred to recent incidents targeting water company staff as “deeply concerning”.

“No one should face abuse or intimidation simply for doing their job. Government has been clear: this behaviour is unacceptable. We have written to water company chairs and CEOs to reiterate that staff safety is a priority,” she said.

"We are working with companies and trade unions to foster a culture of respect and collaboration, and we will continue to engage closely to ensure that every employee can work without fear."

"We are not in competition. We can, and should, work more together”

The Minister concluded her speech on a strongly positive note, saying:

“Finally, I want to be clear that this is our chance to make changes that will have an impact for decades to come.

“The prize is right there in front of us. To be part of real national renewal after years of decline.

“Yes, we face significant challenges, but also huge opportunities to build a regulatory system that is clear, coherent, and focused on outcomes….

“Most importantly, this is our opportunity to rebuild public confidence.”

She told delegates:

“You’ve already begun to show what happens when the sector pulls together. I know that together we can do more. We are not in competition. We can, and should, work more together.”