Water industry responds to Gove’s crackdown

Water UK’s chief executive has launched a staunch defence of the sector following Environment Secretary Michael Gove’s signalling of a crackdown on the “concerning” behaviour of water companies.

In a recent letter to Ofwat chairman Jonson Cox, Gove revealed the government was prepared to give the watchdog more powers to tackle poor practices in the industry, citing executive pay and offshore financial arrangements in particular.

Yet Water UK’s chief executive Michael Roberts said Gove’s letter “unwittingly risks painting a distorted picture of the water industry”.

“The industry is facing a time of increased scrutiny, and although it is right that we face open examination, it is important that we recognise the full picture of an industry that is delivering for its consumers,” he said.

“We do not claim our sector is perfect, and we know that our reputation can never be taken for granted. But it would be wrong to give the impression that all the issues which Mr Gove raises apply to all companies in the sector – or that nothing is being done even where they do apply.”

Gove said the water sector had rightly come under even closer scrutiny in recent months, with the use by some companies of opaque financial structures based in tax havens and high gearing being “deeply concerning”. “I also share your concern that some water companies have for many years been making excessive profits,” he added.

His letter thanked Ofwat for “pressing companies hard” to change behaviour “not least where it has a direct bearing on their corporate, financial and operational resilience”. But he stressed there was “more to be done” and urged Cox to report back with “findings and recommendations”.

Cox replied that it was an “immense privilege” for a company to hold a monopoly public service licence and it “must not be taken lightly”.

Responding in a lengthy, robust statement on Water UK’s website Roberts said that water companies deliver a vital public service and do it well, having taken over an underfunded sector in 1989 following privatisation, which they have turned around.

“They have invested £150 billion to help reduce leakage by a third, improve drinking water so that it’s now recognised as world class, and kept bills roughly even in real terms for the last 20 years. Not to mention the £25 billion being put into improving the environment, cleaning up thousands of miles of rivers.

“Mr Gove is absolutely right to ensure that such a vital service is being delivered responsibly, and that shortcomings where they genuinely exist should be addressed. But let’s not allow that to obscure how much has been achieved to date – and the resolve and ability of companies to strive for better.”