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“Market opening will be the greatest challenge to this sector that I’ve seen in my time.”
You might be surprised to hear the chief executive of Water UK saying that she’d be “distressed” if the organisation were thought of as “the voice” of the UK’s water sector. Many might assume that the primary purpose of an industry trade association is to uphold the interests of its members in Westminster and to lobby government on issues that affect its operations or profitability.
But Pamela Taylor, speaking to Utility Week before she steps down from her role at the end of this year, says a changing political and regulatory environment has ousted that traditional formula.
Despite the hot London day outside Water UK’s Westminster offices, Taylor is cool, crisp and “proud” as she explains the “really dramatic repositioning” Water UK has had to embrace in recent years.
Taylor’s vision for the future of the organisation is steeped in the experience she has built up since Water UK’s inception and, with both a new chief executive and a new chair to recruit this year following the sudden death of Water UK’s first independent chairman, Sir David Rowlands, in 2014, there’s clearly a heavy mantle of expectation to hand over to the fresh leadership duo.
Casting her mind back to the birth of Water UK in 1998, Taylor sets a scene of chaotic dissent: “It was a hostile political environment; it was hostile in terms of stakeholders, public opinion, and so on. The companies looked very much out of touch with their customers and were squabbling publicly and undermining each other and briefing against each other publicly and privately.”
Coming into being late in the regulatory cycle and “too late to influence the 1999 price review”, Water UK’s most urgent challenge was to create a sense of unity and to support the sector through that “sausage machine” of financial scrutiny, which resulted in water company share prices taking “a hammering”.
In this unpleasant climate, Taylor led the drive for Water UK to “get its act together” and become a “well organised outfit”, recognised by key players as a pioneer in stakeholder engagement.
Emphasising just how hard it was to gain that position, Taylor recalls. “I remember when we set up Water UK, I put out a statement that day saying we wanted to work with our fiercest critics – and I named some of them. And do you know what? People got in touch to say, ‘We dislike you much more than those people you’ve named!’”
She chuckles ruefully. “It was utterly, utterly amazing.”
After about two years of “really hard graft”, however, Water UK had made a name for itself with the sector, government and key stakeholders for consumer issues and the environment. This positioned it well to take a more proactive role in shaping the next price review, standing shoulder to shoulder with industry to deliver consensus messages on set piece issues such as the cost of capital.
Creating a team spirit for “fighting the price review” was appropriate then, says Taylor, but fast forward to the present, and the same dogmatism would swiftly result in Water UK being seen as standing in the way of progress – “the first step to becoming irrelevant”.
“What you now see – not just in England, but in Wales and Scotland too – is a new kind of price review. And you see the big change of the regulator’s emphasis on individual companies, on their customer engagement and on transparency,” says Taylor.
Accordingly, Water UK has moved itself “considerably”. It now aims to promote publicly the industry’s contribution to society – something on which it has commissioned a large piece of research – and to be an impartial hub for knowledge exchange and scenario mapping for the future. It aims to clarify the need for a flexible regulatory environment that understands that different water companies, run by different boards, will adopt different strategies and different points of view.
“It’s for us to explain why that happens,” says Taylor – although she clarifies that Water UK by no means sees it as within its remit to comment on the rights or wrongs of specific differences of opinion – such as those points of contention being battled out between Ofwat and Bristol Water in the current CMA hearing.
In a world where regulators across the utilities sector are proclaiming an age of principles-based regulation, Taylor says it is “obvious” and “essential” for Water UK to act as a facilitator of conversations and a source of knowledge about the industry, rather than a lobby group. However, she’s also aware that it may be seen as a “brave” move.
“It’s easier to just say, ‘What can we can all find in common?’ So that we can stand shoulder to shoulder, maybe with our arms folded, and say ‘No’. But you have to bear in mind that if you say, ‘We are the voice of the industry’, generally that means you shout and you don’t listen.”
Looking to the future, and the challenges ahead for Water UK when it loses its original chief executive, Taylor emphasises that being seen as a listener and a body that can broker agreements rather than being able to fight a corner will be particularly important over the course of a parliament where there is such a tiny ruling majority.
“Governments with small majorities tend to avoid primary legislation,” she explains. “They tend to want to do things through agreements, through codes of practice or whatever else. So, looking ahead, we as Water UK need to think about how we position ourselves to be that kind of player.”
Sharing a few more thoughts on what her successor might need to address – though steering clear of sending a “message” to the as yet unidentified candidate – Taylor says they should not be concerned by the lack of noise with regard to water in party manifestos – especially the Conservatives’ – which she says is the product of quiet continuity rather than ignorance.
She does warn, however, that the prospect of a referendum on UK membership of the EU will need careful attention.
“We have been talking in Water UK, since before we knew what the outcome of the election would be, about what impact that may have on the sector and therefore on its customers,” she says.
Taking steps to ensure it can accommodate any referendum outcome and still maintain a presence in European decision making on water strategy, Water UK is reopening its Brussels office and placing staff on secondments to other European water bodies such as EurEau.
“There will be an impact if there’s a yes vote and there will be an impact if there’s a no vote – what might those impacts be and how will they affect the sector? What will the impacts be in existing EU directives and on future ones?
“It’s a classic, isn’t it? How do you maintain influence whether you are close to or further away from the table?” asks Taylor. “This has been in our scenario planning for some time, but it would need to be stepped up now.”
Closer to home, another major consideration for the next chief executive of Water UK will be the progress of market opening.
In its new guise, Water UK will steer clear of praising or condemning decisions about the structure of the new, competitive non-domestic market for water. But it will need to work closely with Ofwat to develop and deliver workshops and insight into key topics. Some, focusing on finance, are already available.
As the date for market opening draws nearer, Taylor says the pressure to achieve successful collaboration and co-ordination of stakeholders will mount. “Everyone – companies, regulators, government, customers’ reps – we know there’s a lot to be done. We’ll have to work together really well and successfully in order to land it. It will be the greatest challenge to this sector that I’ve seen in my time.”
That may well be true, but for Water UK, market opening also holds out an alluring opportunity to significantly expand its membership, embracing the new entrants that are anticipated. The trade body has already welcomed SSE Water into its fold – is it actively courting other potential competitors?
“As a staff team, we do scenario planning a great deal,” says Taylor. “So, in our minds, we had retail as part of Water UK in our planning seven years ago.
“The important thing is always to be open to ideas, open to challenges, open to ‘what if’ and not to think that you’ve got some kind of right or responsibility to keep Water UK as it is.
“If I had to say no to your question, I would have been failing in what I’m here to do. It’s all part of the planning that we do a great deal of.”
This leads us to the only really firm criterion for the next leader of Water UK – they must be able to engage in “horizon scanning” and guarantee that the organisation is never subject to unexpected upsets.
It’s a tough requirement to live up to, but one that Taylor counts as the foremost success of her own career.
“[My] achievement has been to do that. To not have any surprises. Not to have to say, ‘Oh no! Look what the government has decided to do’ or ‘Oh no! Look how that directive has gone and we didn’t expect that’.
“If you’re surprised [as chief executive], then you’ve really not done what you should do. And you’ve not done the role that this is. Here you are in a very privileged and important position. You have a lot of access to a lot of senior people: ministers and secretaries of state, commissioners in Brussels, and so on.
“So the role is really to be looking ahead, scanning the horizon and knowing what’s coming down the line and whether it’s good or bad. It’s making sure that it’s not a juggernaut and you have to jump out of the way. But instead, to ensure that you’ve already known that it’s coming and positioned the sector accordingly.”
So nothing has caught you on the back foot?
“No.” This carefully composed statement of confidence is eyebrow-raising when you consider a career that has taken Taylor through such turbulent times as the Section 13 debacle of 2012, but it is a claim that sits easily with her equally composed professional demeanour.
As we turn to discussing her personal horizons, however, it seems there’s a blind spot.
“I have absolutely no idea,” admits Taylor, when asked what she will do after stepping down as chief executive. “The trouble is that I don’t remember that I’m going. There’s still so much going on in terms of the commitment – and I tend to be a very overcommitted kind of person.”
Pouring praise on the water sector, Taylor continues, “I have had one or two offers, but the trouble is that water is so interesting – it’s got everything: finance, customers, consumers, environment, public health. And you think, well – match that!”
With an eclectic professional track record, however, it seems pretty likely that something tempting and challenging will crop up. Before joining Water UK, Taylor headed up the BBC’s corporate affairs team and undertook management consulting with organisations including the NHS, the World Health Organization and the Design Council.
She’s also had experience setting up charities “from scratch” – the Foundation for Aids and Help the Hospices – and is a trustee for a number of others.
It’s this final line of voluntary work that is most likely to occupy her in retirement, says Taylor, but today, the only thing she’s sure of is that she will draw a firm line under her time at Water UK when the time comes to walk out the door.
“I forget constantly that I’m leaving – but I promise once I’ve left… there’s nothing worse than people who stick around. Just go.”
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