Investment need poses threat to sector credit standing

Credit rating agency, Moody’s, has warned that bill hikes to fuel greater the investment needed to address the impacts of climate change and population growth carry a threat of greater social and subsequent political pressure on water sector creditworthiness.

To highlight the need to maintain the industry’s public legitimacy Moody’s revisited the calls by the Labour Party during the 2019 General Election - based on questions about water sector finances –  to return the water industry to public ownership. ”If companies or the regulatory framework lose public support, political pressure to change will inevitably grow. This could take the form of revisions to the Water Act, new guidance to Ofwat, or in extreme cases revocation of companies’ licences,” Moody’s cautioned.

Moody’s Vice president Stefanie Voelz, said the agency saw risks of future water shortages because of climate change and population growth, with England's southeast most exposed. She added: “To mitigate these risks, significant additional investment will be required, and the associated bill increases will add to affordability pressure."