Ofwat and Water UK have today published a report that explores the potential impact Covid-19 might have on the water sector in England and Wales. This report was prepared by Frontier Economics supported by Atkins.
Covid-19 is having a significant impact on all aspects of the UK economy and will continue to do so in the months ahead. In May this year, Ofwat and Water UK decided to work collaboratively to better understand the potential impacts across the industry and jointly commissioned a piece of research to look at the scale of these impacts under a range of future scenarios.
Frontier collected data from water companies in August 2020 which covered the April-July 2020 time period. The report highlights the areas that companies reported were most impacted during this period and might be impacted in the future. However, given the short timeframe for this project, the data that was collected was preliminary. In light of this, and as there is significant uncertainty about the future path of the pandemic, Ofwat and Water UK recognise the report’s conclusions should be interpreted with some caution.
The report establishes helpful shared evidence on the impacts of the early phase of the pandemic and identifies areas (such as the impact on per capita consumption) that had by July already seen significant change and may be materially affected going forward, and which could benefit from further exploration. It also finds that companies are likely to be impacted differently depending on their particular circumstances and that there are some opportunities for companies to explore.
Alena Kozakova, Chief Economist at Ofwat, said:
“We are pleased to have worked with Water UK, and grateful to Frontier Economics and Atkins for developing this report at pace to help give an initial view of where the areas most impacted by the pandemic are likely to be.
“Water companies responded well to the initial difficulties presented by COVID-19, adapting and even finding new ways to deliver services. We appreciate their work in providing the information that has helped shape this report.”
Rob Wesley, Head of Policy, Water UK said:
“Covid-19 has impacted all aspects of water company operations, from frontline key workers doing whatever is needed to keep water flowing and meet exceptional demands for water, to providing additional support to customers in need.
“Although it is too early to say what the full impacts of the pandemic will be and what changes might be needed as a result, this report provides an important shared evidence base for both the industry and Ofwat. We look forward to continuing to work with Ofwat on understanding the impacts of Covid-19 and preparing for a post-pandemic world.”
Notes to Editors
- The scope of this work focuses on the COVID-19 impacts experienced by the 17 incumbent companies that provide household retail and wholesale water and sewerage services in England and Wales as tested against three possible future pandemic scenarios.
- The report is based on data covering the initial phase of the pandemic, from April-July 2020. The pandemic, and the impacts on water companies, has continued to evolve since then; impacts in the 2020-21 financial year as a whole will be reported in each company’s annual performance report, which will be published in July 2021.
- The report has considered what the potential impacts of COVID-19 might be; it has not looked at the issue of who should bear the costs of any impacts. There are existing regulatory mechanisms which are designed to protect companies and customers against risks of unforeseen events and Ofwat will assess whether any ex-post adjustments are appropriate once there has been sufficient time to understand the impacts of COVID-19.