In an Expert Focus article for Waterbriefing, Chris MacNee, CEO Nexus Water Ltd, discusses the potential impact of the forthcoming EU referendum on the UK water sector.
Chris MacNee:Water is our most precious resource and it is under threat. Issues around water affect all of us, both as individuals and in the business community. We are aware that water scarcity poses a significant problem globally, indeed our water ‘footprint’ has exceeded sustainable levels in several areas around the world. Yet, demand for water continues to grow not least because of climate change and urbanisation.
Added to this are critical issues around water quality which is a major concern for businesses in the UK, many of whom have relationships with Europe. It is interesting, therefore, that there hasn’t been much conversation about the impact of the forthcoming EU Referendum on the UK water industry.
One of the key arguments for Brexit (a UK exit from the EU), is that super-national entities cannot be successful due to the differing interests of countries that are fundamentally incompatible. The same can be said with regards to water. There is little synergy across Europe with regards to water quality and infrastructure and this will only to be exacerbated as new countries join the EU. Today, while tap water is safe to drink in the UK, the same is not necessarily true for the rest of Europe and it varies substantially.
Importance of EU Water Directives cannot be overestimated
However, the importance on water quality and associated environmental issues as highlighted by the EU Water Directives cannot be overestimated. The directives have made a significant contribution in forcing countries to consider the impact of water quality, water sustainability and usage though there is still a long way to go in the application of standards and norms.
It is difficult to imagine that the same focus would be given to these areas in the long term if the UK were to leave the EU and there was no ongoing impetus from Europe. My personal feeling is that there would be a gradual move away from the focus on these hugely important issues resulting in a knock-on effect on the water industry in the UK.
On the other hand, there are many who believe that Brexit would give the UK more control over policy and regulation, offering an opportunity to tailor standards for the specific needs of the UK environment. Leaving the EU, arguably, could allow for a more streamlined decision-making process. Greater autonomy could also mean more flexibility on quality standards without the influence of Brussels. This idea of local control in the UK rather than Brussels is appealing to many. This may also open up new markets within the Commonwealth or opportunities to export water technologies and know-how to countries excluded under EU sanctions.
The global water market today is thought to be worth about $500 billion. Many argue that the UK, despite being small in the context of the overall water industry, can be more efficient and productive by being independent. It is true that companies such as The UK Water Partnership are focused on bringing organisations together to address key challenges facing the water sector and exporting that knowledge to countries including the EU.
Success of partnerships may depend on working as part of a greater European entity
I would contend, however, that the success of partnerships such as these may be dependent on working as part of a greater European entity. Working within a European framework offers the opportunity of working together on issues and advances in technology that are having an impact on a global scale. Having access to a European platform is much more likely to achieve results on global issues such as sustainability, scarcity and security. If Brexit were to happen, then it is likely that we would be putting up barriers to successful partnerships across Europe just as we are beginning to successfully work together to support excellence in research and advancements in innovation.
Many business commentators and industry leaders that I have spoken to over the past few months, genuinely believe that the UK would be stronger out of Europe citing the economy as the main reason. They believe that the UK would be better as an independent sovereign nation with responsibility for its economy alone. In relation to the water sector, however, there is little doubt in my mind that access to the level of funding and grants that are currently available for SME’s would have a detrimental impact on the level of research that can be achieved. EU-wide research grants are hugely important for our sector and particularly in the drive for efficiency and innovation. I believe that the impact of the possible loss of these grants would be felt immediately.
Europe is set for rise in water-related innovations
Europe is set for a rise in water-related technological innovations at the moment. The UK is already very much at the forefront of these and we have made a significant contribution to innovation in the water industry. One of the key contributions that the EU has brought to the table in this area is the commercialisation of these ideas. As an innovative technology company ourselves, we understand how challenging it can be to bring a viable product to the market.
At a European level there are organisations such as EIP (European Innovation Partners) established under the European Union’s Innovation Union Initiative, whose remit is to offer more practical testing, collaboration, co-ordination and exchange of best practices. Recognising key challenges that Europe and other countries face as a whole, helps to identify and remove barriers to innovation.
UK at risk of slipping down the innovation curve outside EU
This includes ensuring access to finance and provision of testing and demonstration sites for example. In our industry we strongly believe that despite ‘availability of water resources’ being identified as a risk for the global economy, water innovation doesn’t always attract the level of funding that goes to other alternative energy sources. We run the risk of slipping down the innovation curve if we were to be outside the EU rather than as a proactive group within.
But outside the EU undoubtedly means less red tape which in itself could enable more innovation and investment in certain areas. It could also offer an opportunity for the UK to secure more home grown financial investment. Stringent rules do inhibit innovation and another consideration to be taken into account is the possibility that stronger alliances could be formed with organisations and economies outside the EU post Brexit.
Benefits UK water sector to remain as part of a European-wide industry
At Nexus Water, we like to say that we are ‘rethinking water’ – how water is used and how it can be better controlled and sustained. We help our customers to improve the quality of their water as well as more effectively monitoring its usage. We are speaking to a variety of different businesses and organisations every single day and know what is driving them to take responsibility for their water management.
Driven by consumer expectations in many cases, businesses want to reduce operational costs and reduce carbon emissions. I really do believe that while the UK is in a strong position, it benefits the water industry specifically to remain as part of a European-wide industry and movement.