How does water supply and treatment operate in the UK?

Water management runs in five-year cycles known as “Asset Management Periods” or “AMPs” for brevity. During this time, water companies are required to meet specific targets for performance and service provided whilst adequately justifying their spending to the regulator.

England

In England, all water companies are currently privatised, that is, they were taken out of public ownership in the 1980s and put into private ownership. With private ownership, the government took on their debt and enabled the companies to start debt-free. Additionally, the ability to attract investment was thought of as a key input to solve decades of underfunding of the water infrastructure by successive governments to both improve infrastructure services and reduce consumer costs.

Water companies in England are known as a “natural monopoly” as you cannot choose your supplier as suppliers exist on a geographical basis, with usually one cover per region; the exception is where there is a clean water provider and a wastewater provider separately as opposed to a combined water and wastewater company. This eliminates any competitive pricing as each company has no one to compete with and poses the issue of a lack of natural market pressure to cut the cost to consumers to undercut a competitor.

Wales

In Wales, the largest water company is Dwr Cymru Welsh Water which is run as a not-for-profit.

There are other smaller water companies that exist in Wales. For example, Hafren Dyfrdwy covers NE and mid-Wales, and are owned by parent company Severn Trent.

Scotland and Northern Ireland

Neither Scotland nor Northern Ireland privatised their water companies under the 1989 act, and they remain in public ownership.

How are English and Welsh water companies regulated?

Ofwat is the water regulator for England and Wales, a non-ministerial government department which acts as an overseer to water companies’ operations including infrastructure development, consumer responsibility and asset future-proofing.

Water management runs in five-year cycles known as “Asset Management Periods” or “AMPs” for brevity. During this time, water companies are required to meet specific targets for performance and service provided whilst adequately justifying their spending to the regulator.

With each new AMP, Ofwat will lay out aims for water companies to prioritise as they draft their plan. Water companies are then required to submit plans to Ofwat detailing their idea management of investment and infrastructure, and how financial resources will be managed to achieve this. This is known as the “Price Review”, as a large portion will affect how the customer is charged for water, a contentious topic amongst UK citizens at present.

April 1st of 2025 marks the start of AMP8, which will run from 2025-2030 and the main aim set out is to enhance the resilience and sustainability throughout the UK water industry. The emphasis has been put on using innovation to find solutions, with significant financial investment to support these projects. Currently, the UK water industry, and indeed water infrastructure worldwide, is addressing the issues of water quality whilst also accounting for a changing climate and the challenges it will pose.

Author: Hannah Gunter

13th Feb 2025