Ben Brading 8 min read

Understanding the British Water Industry

The British water network includes 1,000 reservoirs, 2,500 treatment plants, and more than 700,000 kilometres of pipes.

It supplies clean water to over 25 million homes and 6 million businesses – the British water industry is of a substantial size.

Ipsos Mori, a market research firm, has found British water and sewerage services to be the second-highest rated globally. UK water supply is of universal high quality with consistently safe and pure supplies.

Like the British energy industry, the water industry is also privatised and is managed separately by numerous for-profit companies and government-appointed, not-for-profit entities.

Here’s our simple guide to the roles of these organisations and understanding the British water industry.

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A Brief History of the British Water Industry

Before diving into the different organisations involved in the British water industry, it’s worth considering how we got here.

In the early 1900s, the water industry was highly fragmented, with over 1000 different companies supplying freshwater in their local area and a similar number of separate companies involved in sewage removal.

Severe droughts in 1959, followed by flooding in 1960, pushed the government into a more coordinated response to water resource planning established in the Water Resources Act 1963.

By 1970 the responsibilities of maintaining the water network had consolidated into the 12 wholesalers that manage the water network today.

In 1989, the water industry was privatised, with the government selling the regional wholesalers as public companies.

To ensure that the interests of the population and the environment would continue to be prioritised, the government established regulators to monitor the privatised wholesalers.

Following the deregulation of other utilities, the government decided to deregulate the water market to encourage better customer service and lower prices by introducing direct competition between suppliers.

Deregulation occurred in 2008 for Scotland and in 2017 for England and Wales. The deregulation process separated suppliers from infrastructure management in the non-household market.

The household market for water remains regulated, and households are invoiced directly by the wholesaler that manages the water infrastructure in the region.

What are the different parts of the British Water Industry?

The Regulators

Ofwat is the regulator for England and Wales, and the Water Industry Commission acts as the regulator for Scotland. Both entities are non-ministerial government departments.

They aim to:

  • Protect the interests of the consumers by promoting effective competition.
  • Ensure all organisations involved in the supply of water properly carry out their functions.
  • Ensure there is sufficient private investment in infrastructure to protect future supply.
  • Oversee the suppliers of water and ensure they deliver public value.
  • Promote economy and efficiency in the water sector.
  • Regulate the charges levied by water suppliers on consumers and businesses.
  • The regulators also aim to encourage best practices within the industry, asking all participants to be transparent, accountable, proportionate, consistent and targeted.
  • Regulate business water rates with a price cap.

The Wholesalers

The water wholesalers have regionally appointed companies that own and operate pipes, mains and treatment works across the UK for the British water industry.

England and Wales are divided into eleven regions, with a separate wholesaler for each area. Please refer to Ofwat’s helpful guide to find who is the wholesaler in your region. Scotland has a single water wholesaler, Scottish Water.

The wholesalers collect and store water, treat it to drinkable standards, and then pipe it to homes and businesses. They are also responsible for the removal and treatment of wastewater to be safely returned to local reservoirs.

The wholesalers make their money by selling water to the business water suppliers at the wholesale rate. The regulator determines the wholesale rates depending on several factors, such as water scarcity in each region.

In the regulated household market, the wholesalers also act as suppliers, billing individual households in their region for the water they use.

The Water Quality Inspectors

The government has appointed independent bodies to provide reassurance over the quality of drinking water supplied by the wholesalers.

The Drinking Water Inspectorate checks the supply quality in England and Wales, while the Drinking Water Quality Regulator performs quality checks in Scotland.

The Business Water Suppliers

The suppliers are for-profit companies with a license to supply water services to the non-household end-users of water.

For businesses and other organisations, supply can be provided by any company holding a water supply license. There are currently 20 such suppliers operating across Britain.

The suppliers purchase water from the wholesalers and then charge this separately to individual businesses and other organisations.

The supplier is responsible for taking water meter readings to assess their customer’s water consumption. The suppliers are the point of contact for the users of water, providing customer services.

In the open water market, businesses can switch business water supplier – so that the business suppliers can compete on pricing and service.

For businesses, it’s worth regularly comparing your current water tariff to alternatives provided by other suppliers to ensure you are getting the best deal possible.

Challenges ahead for the British Water Industry

The water industry faces several challenges to ensure the long-term sustainability of water supply and sewerage services.

Although the British Isles may be famous for its rainfall, a combination of increasing population and climate change is expected to increase the scarcity of water significantly. Check out our article on our daily water footprint.

The environmental agency has predicted that in 25 years, the UK will not have sufficient freshwater to meet demand.

The unpredictability of British weather makes the water network particularly susceptible to shortages with long periods without rain that can occur at any time of the year. Worryingly, climate change is exacerbating the extremes, and East Anglia has already been classified as a semi-arid region.

The water industry is responding to these challenges with a dual approach of increasing supply and reducing demand.

To increase supply, the UK is working on improving water infrastructure. In June 2021, approval was granted for Portsmouth Water’s £100m new reservoir at Havant Thicket, the UK’s first new reservoir in 40 years.

Also, regulators demand annual improvements in water leakage statistics from the wholesalers.

To reduce demand, British businesses and households are encouraged to implement water-saving measures. At the same time, parliament is considering regulations to encourage water efficiencies as part of their 25-year environment plan.

Water suppliers are also coming under increasing pressure to reduce the negative environmental impacts associated with dumping sewage into rivers.

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