The water minister has mooted a rationalisation of the structure of the industry in England.
Responding to questions during a fringe meeting at the Conservative party conference in Birmingham, Thérèse Coffey pointed to the existence of “some huge companies and some absolutely tiny companies.”
Namechecking Bristol Water, Cambridge Water and South Staffordshire Water as examples of the smaller companies, she said: “Ofwat historically have never wanted to change that. Perhaps there is an opportunity in the future but we would only do that if we had a big revolution in the way the industry operates.”
Coffey also responded to calls for greater liberalisation of the household water market. She said the government is “watching carefully” how the creation of the retail market for businesses is shaping up.
She said that while many large businesses had taken advantage of pulling together their water supply arrangements into one supplier, there had been little take up so far by smaller firms.
And while Ofwat may have a “possible role” in encouraging firms to switch suppliers, the minister expressed a preference for allowing the market to “take its way”.
Coffey defended the privatisation of the water industry in the late 1980s for injecting much needed investment but raised concerns over how its corporate structures has developed in recent years.
Backing Ofwat chair Jonson Cox’s moves to reform the industry’s regulation, she said: “More money has been made out of financial engineering than from the business itself.”
Michael Roberts, chief executive of Water UK, raised concerns over proposals by the Labour party to absorb Ofwat into the government if it gets into power and privatises the industry.
He said: “It raises the risk of a significant degree of political intervention that doesn’t exist today. There are good reasons why we have politicians setting outcomes and regulators translating that into objective oversight.”