Deloitte questions benefits of UK water competition

Published February 10th, 2011

Current plans to introduce retail competition into the UK water sector will add £60 to annual non-household bills for little medium-term benefit, Deloitte warned industry regulators and investors this week.

A report from the business advisory firm said the proposals would not deliver the same gains in the water industry as retail competition had in the telecoms, gas and electricity sectors for three reasons: their lack of focus on well-identified and significant cost inefficiencies; their limited scope (proposals do not currently include domestic customers); and the absence of upstream competition in the sector.

“This leads to such a long pay-back period that the reform’s present assumptions fail the cost-benefit test,” maintained Doug King, senior utility partner at Deloitte.

The firm suggested that alternative “first steps” towards competition – such as facilitating the bulk trading of water – are likely to provide much greater benefits to customers in the near- to medium term.