“In the face of critics, we should be hearing about what the sector has achieved”

It’s two years since Michael Roberts took the helm at Water UK, taking on responsibility for its continued evolution away from being a pure play industry lobby group, and towards a more dynamic role as a co-ordinator of key water sector campaigns and operational best practice sharing.

And despite those two years throwing up unexpectedly trying conditions – namely a political backlash against water companies for opaque financing and lacklustre customer service – he says he has no regrets about taking the chief executive job.

The issues have proved to be even more interesting than perhaps I had anticipated

“What really attracted me is that some of the challenges facing the water industry are really significant, such as pressures presented by economic growth and climate change in a sector that has a legacy infrastructure and provides a service that is so fundamental to our everyday quality of life,” he tells Utility Week when we meet at Water UK’s headquarters in London.

“The chance to work with other companies and partners within the sector – to work through these challenges – was a really exciting opportunity. Nothing has happened in the past two years to suggest that was the wrong call to make. On the contrary, the issues have proved to be even more interesting than perhaps I had anticipated at the time.”

Roberts’ experience grappling with high level industry challenges is extensive. He has previously held senior roles at the Confederation of British Industry, working in policy development across a range of sectors including the environment, energy and transport, before which he worked in political consultancy. He has also served as a non-executive director of the Carbon Trust.

Before joining Water UK, Roberts was chief executive at the Association of Train Operating Companies between 2008 and 2015 – a role which was combined with that of director general of the Rail Delivery Group from 2014.

We help provide information on behalf of the sector to the outside world

Now, with Water UK, he is responsible for a hub that brings together the interests of major water and wastewater service providers across England, Scotland, Wales and Northern Ireland. “A lot of what we do is about helping to shape and influence the policy framework in which companies can operate,” Roberts explains.

“But apart from trying to shape policy from Defra [the Department for Environment, Food and Rural Affairs] or the Environment Agency, for example, there are other things we do. We help provide information on behalf of the sector to the outside world to inform people about what we do and how we do it. This includes the Discover Water website as well as other initiatives such as our recent Refill announcement.”

A week before Utility Week meets Roberts, the water industry launched a national scheme to cut plastic bottle use by tens of millions a year while increasing the availability of free drinking water. Water companies across the UK are joining forces with City to Sea, the driving force behind the Refill scheme, to create a network of stations for the public to refill their water bottles.

There will be refill points in every major city and town in England by 2021. Whitbread, which owns Costa Coffee and Premier Inn, was the first business to join the scheme, pledging to offer water for customers and passers-by at each of its 3,000 sites from March 2018.

“The reaction to the announcement has been fantastic; but an announcement is one thing, now we have to deliver that ambition,” Roberts says. He explains that water companies will work with Refill to develop local action plans by September this year.

PR19 is a tough approach and it will be tougher for some than for others

There is another key milestone for water companies that month – the submission of PR19 business plans. On PR19 and the price control challenges facing water companies, Roberts echoes the common narrative that it is a “tough approach”. “Ofwat’s direction of travel has been known for some time. The regulator has been trialling its approach for at least as long as I’ve been with Water UK,” he says.

“PR19 is a tough approach and it will be tougher for some than for others. But fundamentally companies are getting on with the business and saying: ‘Right, how do we now respond to the direction that has been set in clear detail – in most areas – by Ofwat?’”

Put simply, Roberts says, what the sector is trying to achieve is the “resilience of water resources and wastewater services at a price that is affordable and to do it in an efficient way that is customer focused”.
“And that’s an ambition everyone in the sector shares, among the regulators, within government and so on.

Water UK provides information and we share intelligence and good practice within the sector. It’s not just about responding to government or Ofwat consultations,” he says. “All of what we do is for a purpose. We have a mission to be trusted as a sector providing world-class services that promote an improved quality of life to customers and communities, and we try to promote that by bringing people together and sharing ideas.”

But Roberts says the emphasis of Water UK’s engagement with various stakeholders and partners will vary over time. “Sometimes we will focus more on engagement with the government, sometimes more with the regulator. In the case of the wider debate about nationalisation, which has really gone up the agenda lately, it’s more about engagement with the wider public.

“We’re at a point in the cycle of the sector where the regulator is still an important partner, but given where we are in the PR19 process, a lot of the action is between companies and Ofwat. We possibly have a slightly lower key role than otherwise might be the case.

At the moment more of our engagement is with government and political institutions such as Parliament,” he says.

An appealing aspect of the water sector is the real appetite to think long term

Roberts describes Water UK’s contribution to PR19 as “flanking and supporting elements that help with the overall shape of the framework”. He refers to the “ground-breaking” work Water UK published in 2016 – the Long-Term Water Resources Planning Framework.

The organisation worked with companies, regulators, academics and NGOs to produce the report, which looks at water resources in England and Wales for the next 50 years.

“The dynamic model – rather than a retrospective one – explores the challenges of ensuring public water supply in the face of climate change and population growth,” he says. “It demonstrated the sector’s ability to come together and think ahead strategically about the nature of the challenge and how people will respond to it.

“Such research helped raise the knowledge level in the sector, enabling companies to go away and plan. Hopefully, in turn, they will deliver robust business plans that will stand up and deliver over time.”

Another appealing aspect of the water sector is the “real appetite to think long term”, Robert suggests. “Notwithstanding the five-year investment cycles, companies are pro-actively – or at least with active encouragement from the regulator – not constraining their thinking to only five years ahead.

“One of the things that has struck me over the past two years is the vigour with which companies, certainly at CEO level, are thinking about how we can constantly improve. And the vigour with which they think about what the future shape of the sector will be.”

We start from a good position, but yes, we can do better

Roberts feels there is a “good degree of trust” in water companies, despite recent criticism. “That’s not to say there isn’t more that we can do. Although I feel pretty confident in saying every chief executive in the water sector is passionate about not just sustaining but improving the level of trust that their company has with their own customer base. “We start from a good position, but yes, we can do better.”

On the wider nationalisation debate, Roberts believes the last-minute commitment to renationalisation in the Labour party manifesto “caught lots of people by surprise”. “I don’t think the topic was at the forefront of many people’s minds beforehand and we would argue it is questionable that there is a major problem in the sector that needs a radical solution. The water sector has a fantastic track record in private hands. Yes, bills did go up in the first years of privatisation, but that was to reflect the need to make up for many years of underinvestment.”

Roberts says there is an “enormous amount to be proud of and there’s a question mark over the problem we are trying to fix”.

“Is nationalisation the right answer? We feel there are potential risks associated with such a move. Our job is to present those questions and potential risks to policy-makers and encourage them to think hard about whether that is the right way forward.”

But the Labour party is not the only organisation from which the water sector has been taking a bashing. Environment secretary Michael Gove has signalled a crackdown on executive pay and offshore financial arrangements to address the “concerning” behaviour of water companies.

On the day Roberts spoke to Utility Week, Gove wrote a letter to Ofwat’s chairman, Jonson Cox, suggesting the government was prepared to give the regulator more powers to tackle questionable practices in the industry.

These structures didn’t and don’t provide a tax advantage

Discussing the matter in more general terms, without knowledge of Gove’s letter, Roberts defends the water companies. He says they have already made commitments to address such financial structures.

“These structures didn’t and don’t provide a tax advantage,” Roberts says. “They were set up for legitimate reasons to raise bond finances that are simply not relevant now.”

Throughout his 30-year career, Roberts has worked at the interface between the public and private sectors, in industries where there is often a strong public interest – such as water and rail. “In most of my roles it’s been about trying to help create conditions within which companies can prosper by doing the right thing,” he says.

“In the face of critics, we should be hearing about what the sector has achieved and the contribution it has made in the past 30 years. We can’t just gloss over that, but we recognise we do have a model that needs to evolve and continue moving.”