Government urges water sector to smooth out investment cycles
Water companies could save more than £1bn if the problem of cyclical investment in the sector was properly addressed according to the latest government findings.
The report, produced by Infrastructure UK, makes recommendations to level out the workload for water contractors over each 5-year asset management plan (AMP) investment period, including challenging the notion that schemes must begin and end within these periods.
The study, published with the support of the water industry and regulator Ofwat, estimates that companies could achieve efficiency savings of between 3% and 5%, equating to between £600m and £1.1bn every five years. It also estimates that the loss of productivity caused by cyclicality adds an extra £5 to £6.50 on to customer's annual water bills and approximately 40,000 jobs could be saved if the recommendations are implemented.
The Institution of Civil Engineers (ICE) has backed the proposals, heralding them as 'welcome' and 'timely.' ICE Director General Nick Baveystock, said: "Addressing cyclicality will amongst other benefits provide a platform for growing skills and capacity in the supply chain, leading to greater value for money in the long run. We stand ready to work with Government, Ofwat and the Water Industry on its implementation."
Since privatisation the private sector has pumped £98bn of investment into the water industry but the AMP-cycle model has led to a stop-start cycle which results in lean periods of uncertainty.