The supply chain has a critical role to play in the complex challenges facing the UK water sector in AMP8, and its successful delivery, says Lila Thompson, the chief executive of British Water.
“There is no time to waste. Now is the time to get serious about water as an imperative for climate action,” said a joint statement from an eminent panel of water and climate leaders at the UN COP27 negotiations in Egypt, in November 2022. The statement urges heads of state and governments to take a more integrated approach to water to replace the existing fragmented management across the world.
Closer to home the water industry is facing a challenging backdrop of supply chain disruptions, energy price increases, skills shortages, and the need to address sector-wide carbon targets and environmental and performance issues.
We believe failure to address these challenges could lead to further difficulties for the whole sector, including and perhaps most dramatically of all, suppliers leaving the UK water sector to explore other markets including those overseas.
In today’s resource-constrained market, this will severely limit utilities’ ability to meet customers’ expectations and could result in water companies failing to meet Ofwat’s required regulatory outcomes in AMP8 – the regulatory asset management period 2020-25. The supply chain is critical in the delivery of these outcomes, with external expenditure on goods and services amounting to around 55% of water company revenues, according to the Institute of Civil Engineers.
The water industry is the most capital intensive of all major sectors and its supply chain is complex, and will become increasingly so as the industry shifts focus away from asset intensive processes to services such as nature-based solutions, digital technologies and demand management.
That is why pragmatic decisions need to be made urgently, and communicated properly, within the water industry to keep it moving forward, with fully engaged suppliers playing a leading role.
The relationship between the regulators’ requirements and inputs from the supply chain is indirect. It functions in a complex dynamic via water companies’ planning and procurement, and the need to deliver services to customers and protect the environment.
It is heavily dependent on the management of water companies’ relationships with the supply community, and British Water believes this indirect linkage is ripe and ready for improvement – with substantial benefits for customers, the environment, the companies, and their shareholders.
Earlier this year, British Water’s Supply Chain Taskforce surveyed supply chain companies on their experiences of working with water companies in three key areas – innovation, procurement, and cyclicality.
Using the valuable findings in our submission to Ofwat for the 2024 price review, British Water recommended that the regulator measure supply chain satisfaction with water companies, and water company satisfaction with their supply chains. This would build on the work of British Water’s annual Water Company Performance Survey, and further the understanding of resilience in the sector at a time when supply chain connectivity is of paramount importance.
In responding to Ofwat, British Water explained that the supply chain is a community, which can bring important markets to water if enabled properly. To achieve this, joint working initiatives that provide opportunities for supply chain companies to participate and up their contribution to tackling these big issues will be key.
The sector will be better able to tackle its joint problems by bringing together individual companies, across utilities and the supply chain, along with sector organisations such as Water UK, UKWIR, WRc, Spring – as well as British Water’s UK, technical and international forums and the Water Industry Forum.
What is clear from the conversations taking place at COP27 is that the world is finally starting to understand the value of water and the ongoing importance of protecting, conserving and restoring water and water-related ecosystems. Closer to home, it is clear that here in the UK there is an urgent need for change across the industry to meet these pressing challenges too.
British Water and its supply chain members are ready and willing to be an integral part of the discussions and help drive action. We are committed to work with regulators, water companies and other stakeholder to drive these matters forward as we move closer to AMP8.
If COP27 can be considered to be a watershed moment for climate action, then with the right relationships, policies, knowledge and tools, AMP8 could prove be a watershed for the UK water sector too.
British Water represents the interests of UK water and wastewater supply chain companies together with wider stakeholders across the sector, through its UK, Technical and International forums, connecting them to contacts to raise their profile, grow their business and promote best practice. Our Water Industry Forum provides challenge-led, independent thought leadership, to tackle the challenges facing the sector.
