Leader: ­Business Stream will come back stronger

So the Scottish government has finally admitted what the market has known for months – that Anglian Water Business was the most competitive bidder for the highly prized Scottish public water contract, and that home player Business Stream came in second.

As Mathew Beech details on page 9, this is a bruising blow for Business Stream – but a win for competition. After all, a so-called competitive market is nothing but empty words if the government is too scared of political blowback to follow the rules of its own tender. The Scottish government has done the right thing, and Anglian Water Business has received a boost that will perhaps spur it on to even greater things in the English market.

But don’t write Business Stream off just yet. The seasoned Scottish player, the only company with first-hand experience of defending its territory in a competitive market, will be looking to win back its loss south of the border. The company has been active in shaping the emerging English market, as the leading prospective new entrant, fighting hard for a level playing field. Just this week, chief executive Johanna Dow argues in these pages that the in-area trading ban must stay until market opening to stop incumbents tying business customers into long-term contracts (see p6).

Many would disagree – Dow’s arguments are sound, but the other side of the debate would say that the in-area trading ban hamstrings incumbents in the run-up to market opening, and creates the potential for the system to fall over if thousands of customers have to be transferred from incumbent in-area companies to new companies outside the licence on the day of market opening. The case for a higher margin – which Dow has also made eloquently – is more clear cut. If the UK government is truly committed to creating a competitive market, it ought to obey the rules of economics and allow private companies to make a reasonable profit. Right now, most companies are operating in the private belief that the margins will have to go up in due course, as they did in Scotland. Wouldn’t it be better to make such a decision transparently, and up front?

Bloodied by not bowed, Business Stream will no doubt continue to lead the debate on such issues for prospective entrants. Outside the policy world, one way to seize back the initiative in style would be to seal the first deal for an exiting incumbent’s book of business customers. Watch this space.