Water has value - and so does the water business
The Government would do well to heed the words of a much older statesman, says Chris Hoggart, chairman of the Environmental Industries Commission's water management working groupIf only we'd listened to that great scientist, inventor, statesman and philosopher Benjamin Franklin we might not now be in this economic mess. Back in the 18th century, Ben said: "If you would know the
value of money, go try to borrow some; for he that goes a-borrowing
Clearly, many in the finance sector did not know the true value of the money they were borrowing or, more to the point, lending, trading and re-selling. Unfortunately, those at the forefront of all this 'sorrowing' activity still don't seem to have learned the required lessons from the whole debacle.
Within the water business we like to think that we have a better
grip on the value of our primary raw material - the water itself, that is.
But have we?
It might be argued that some of the industry's stakeholders, the politicians, the regulators and even, perhaps, the green groups seem to understand the intrinsic value of water, but surely the consumer has yet to be convinced? And if we understand the true value of water why do we allow it to be polluted at so little cost?
Unfortunately, organisations that contaminate water are forcing downstream users and natural environmental processes to clean up their pollution without paying a fair, economic price for this remediation. It also appears that the same is true of the business of water.
When it comes to the water business we seem not to have made the case that our industry is a valuable asset to UK plc. Of course, we in the Environmental Industries Commission (EIC) are doing our best to lobby politicians to this effect particularly throughout the recent election campaign and during the run-up to the resulting emergency Budget. For instance, our Water Management Election Manifesto was sent to all political parties during the election campaign.
It stated that: the UK water industry in total is worth nearly £8B a year and brings in more than £1B a year in the form of exports; sixty-two per cent of the value of the industry is contributed by supply chain companies;
the water and wastewater treatment industry is the third biggest exporter of all the sectors in the environmental technologies and services market.
Clearly, then, the sector as a whole is immensely important to the country's well being. Yet, do we act as though this is the case? No, it appears not, as we have an industry which is in decline as far as employment, skills and reputation on the world's stage is concerned.
So, what can we do to value our water and its industry more highly and then use these new valuations to boost the country's income? Well, we could try the following three suggestions which are also taken from the manifesto:
1) As stated above, we assign little value to the aquatic environment as we allow the environment to partially fund polluters' businesses.
This failure of the market needs correcting and the EIC has been lobbying all political parties that this should be accomplished through a radical change in Government policy. What is required is a strong legislative and regulatory framework that embraces low carbon and sustainable growth and puts an appropriate price on pollution and water management.
The boost to the environmental industries that such a move would engender would help the technology and consultancy sectors to return to their role as a prime engine of growth for the UK economy by capturing a significant share of the world's US$3T and growing environmental market.
2) The EIC has consistently argued that the regulatory regime for Ofwat's Periodic Review creates a "boom and bust" financial climate for the supply chain serving the water industry in the UK as capital expenditure is far from uniformly distributed throughout the five-year funding cycle. This situation leads to financial and managerial inefficiencies, instabilities in the supply chain, and ultimately to higher costs for consumers.
A further consequence, over the years, has been the migration of skilled resources out of the sector to more stable sectors, where job security is better, creating a severe and worsening skills shortage. The answer, of course, is to reform the legislation governing Ofwat so that the regulator has a much wider obligation to promote a sustainable water industry including the requirement to maintain both skills capacity and the health of the supply chain in the sector.
3) The UK's wastewater and water management sector currently makes up less that 3.5% of the global market. The sector's share of this market could increase significantly through effective government support for tackling water quality through ambitious water management and pollution control measures.
Ensuring the UK meets its responsibilities under the EU's Water Framework Directive for all rivers to reach 'good ecological status' by 2015 would be a good first step in this direction. Our current lack of ambition in this area can be seen by the fact that the Environment Agency predicts that only 26% of rivers in England and 35% in Wales will reach the required standard by the specified year.
It looks likely, then, that as far as valuing water and the water business are concerned we have some work still to do. Perhaps we should go back to the words of Benjamin Franklin who also said: "When the well's dry, we know the worth of water."