Ofwat: major projects programme will drive growth

(by Verity Mitchell)

Ofwat has published a report, Economic impact of water supply infrastructure investment, which argues that investment in major capital projects in water supply drives economic growth.

Working with KPMG, Ofwat set out to prove how the proposed £50bn investment in strategic water resource options will provide economic benefit to England and Wales by quantifying the Gross Value Added (GVA) of water supply investment. Across the UK economy, GVA analysis provides an assessment of the economic contribution of individual sectors to domestic outputs and reflects how changes in one sector’s output would affect the economy through supply chain multipliers, job creation and consumption.

The report concluded that the total temporary, one-off GVA impact from water investment is estimated to be in a range of £28bn to £41.1bn (driven by the £25bn increase in capital expenditure), and the peak temporary one-off job creation is estimated to be within a range of 31,988 to 46,916 new roles.

Ofwat added that RAPID's focus on identifying the best value project option is in itself important for growth, as it allows customers to spend money on other goods and services.

Ofwat cautioned that these impacts are temporary, but that longer-lasting outcomes, such as the development of a skilled and adaptive workforce, also emerge from the effort. It said the water  projects will leave behind a more skilled and resilient workforce through boosting labour demand, stimulating training, and encouraging localised skills development. In turn, this workforce forms a flexible foundation for future infrastructure programmes, creating transferable resources and skills which will help support the productivity of the construction sector.

In May 2024, the growth duty on regulators was extended to include Ofwat, Ofgem and Ofcom. The growth duty states that regulators must “give appropriate consideration to the potential impact of their activities and their decisions on economic growth, both for the regulated industry and for the wider economy.”