Water UK warns of greater cost of debt

The loss of European Investment Bank (EIB) money to the UK water sector following Brexit could add “tens of millions of pounds” every year to the cost of raising debt according to Water UK chief executive, Michael Roberts.

His warning came in his speech to Water UK’s City Conference last week. Roberts (pictured) said transferring to other sources following the potential loss of EIB funding could add dramatically to the cost of debt for water companies over the duration then during the next AMP. He went on to explore the growing uncertainty effecting much of the economy and its implications for the water sector.

“Now, in March 2017, uncertainty feels like the order of the day. And that matters in a sector where greater uncertainty has the potential to feed through into higher financing costs and pressure on customers’ bills."

But he did see an upside to Brexit. He said that “Greater domestic control over green legislation and public funding for agriculture offers a big chance to re-shape these two key elements of the business environment for water companies. The prize is greater scope for water companies to work with others in delivering continued high standards of water and environmental quality more cost effectively,” said Robert.

He highlighted the change that business market opening will bring. And he said it was “no bad thing” that delay in any extension of competition to the household sector was being signalled by government and customer reactions. He said a pause in progress towards domestic competition would give the industry and Defra time to learn the lessons from non-household market opening before applying it to the household market.

“The absence of a formal Government response to the Ofwat review, and CC Water’s lukewarm reaction to the potential level of savings, all point to a pause at the very least,” Roberts said.

Roberts said the water sector needed to ensure that its contribution to the wider economy are "well understood by the public and politicians." He added: "If we don’t, the risk is that our needs will get overlooked – or worse, compromised."