Alex Graham and Jamie Harrison, Egremont Group Policy, Policy & regulation, Regulation, Opinion

"Change is coming and we need to get ready"

Brexit – no one can agree on it, some fear it, some welcome it, some hope it will never happen, putting political opinions aside we feel it’s time to start thinking about what it might mean for our industry. How about we look at it differently, face it head on and seize the opportunity to cut down the forest of red tape that threatens to strangle our industry. Why not work together and embrace this once in a generation chance to influence and lobby government to build a better, brighter future for the water industry and create new standards which allow the sector to thrive.

Change is coming and we need to get ready. Other industries from financial services to aviation are ramping up their Brexit teams and coming together with industry peers to plan for the future. Yet as a sector, we the UK Water Industry are seemingly sleepwalking towards a Brexit. The last time Water UK published a Brexit Update was August 2014.

Short-term risks

Now is not the time to sit back and wait to see what happens. We could be heading towards a perfect storm where Brexit uncertainty combines with a new regulatory cycle causing a raft of short-term shocks or risks.  Are you ready for:

  • The financial impact of a credit downgrade for UK combining with a credit warning for the water industry?
  • A stalled EU supply chain, delayed by trade negotiations? What if chemicals and pumps are held up in customs? Have you considered the impact on the security of clean drinking water supply?
  • Your skilled workforce of Electrical and Civil engineers suddenly becoming attractive targets for sectors with deeper pockets (e.g. Oil & Gas) who may lose ‘foreign’ employees due to new European labour laws?

But enough on short-term risks, let’s look at what could be achieved long-term by working smarter together.

Current regulation is a multi-layered mess of red-tape where siloed Government agencies often enacting EU directives have piled on more and more rules over time. Creating laws where one size fits all (27 EU countries) has led to an uneven landscape of over and under-regulation.

New regulations

One good example of this is the effectiveness of the Freshwater Fish Directive/Water Framework Directive where the nature of EU Directives taking a (well-meaning) singular stance to improving standards for a diverse set of countries has resulted in over regulation for the UK. The measures that needed to be put in place to meet the new regulations such as asset creation (e.g. concrete pouring), increased use of energy for aeration and increased chemical use, may well have had a more detrimental effect on the environment in some areas of the UK. Two steps forward but at least one step back.

Let’s challenge regulatory orthodoxy with a more nuanced UK specific (e.g. catchment by catchment) approach to improving river water standards. This way it will be possible to get value for our investment and perhaps more importantly, a better overall environmental impact.

Reducing regulation should be possible as unlike the majority of our EU neighbours, the UK water sector is a competitively regulated market. Therefore, each water company is already well incentivised to ensure fair competition in their procurement processes and good value for money. The UK naturally requires less procurement regulation and bureaucracy in comparison to countries where water is provided by the state or a single entity. That after all is the beauty of the invisible hand of the market.

Take the myriad of regulations that govern bio-solids to land recycling, these are ripe for a review without relaxing standards. The UK is unique, given our population density, in the level of energy generating digestion and sludge to agriculture recycling. With hardening attitudes in the EU to the use of biosolids in agriculture, we should look at how we can protect our existing disposal routes.  Furthermore, by taking a lead on a risk vs benefit assessment of the legislation on the recycling of sludge to land, we can work out how to open alternative disposal routes that are more cost efficient, better for the environment and improve stakeholder and public confidence and ultimately lower costs i.e. bills to customers. For a Government that aspires to create a greener, more environmentally friendly country it’s a win-win.

Little effort

What about in areas that have been under-regulated? All the major political parties are united in their ambitions to clean up our natural environment, the recent banning of microbeads in cosmetics is a good example. Yet there has been precious little effort made to tighten regulation on sewer network abuse. It has been hard to miss the press coverage recently about ‘fatbergs’ caused by careless disposal of fats, oils and grease combined with the rise in popularity of flushable wet wipes. These beauty products are causing chaos in our sewers, costing the industry hundreds of millions and undoubtedly resulting in serious environmental damage. Surely, this is an area where we can lobby the UK government to create new regulations which stop these frankly unnecessarily products entering our environment.

Finally, and perhaps most exciting of all, it is worth remembering that in the UK we have one of the oldest and most competitive water industries in the World. We have the opportunity to reshape our national ambitions, pioneering and innovating as we reset the rules of the game. Together we can create an agenda which incentivises every UK water company to take a lead on the world stage in the efficient and environmentally sound provision of water and waste water services. There are no reasons why we should not seek to export our water expertise as a nationally and internationally celebrated industrial success. The future is there for the shaping, so let’s face it head on together.

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