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Scottish experience of water competition is game changer for England

It's not in the nature of Scots to brag about their achievements.

Mark Powles, chief executive of Business Stream
Mark Powles, chief executive of Business Stream

There's a quiet national pride about things like the telephone, television and penicillin having been invented here, and very little recognition that Scottish inventors also gave us the cash machine, criminal fingerprinting, and indoor toilets (granted, the indoor toilet really had to be Scottish - necessity, and occasionally frostbite, being the mother of invention).

There's another lesser-known Scottish innovation, the influence of which is currently being felt in England. In 2008, competition was introduced to the non-household water market - meaning every business, public sector organisation and charity would be able to choose its water and waste water supplier.

So far, so what, right? I get it - it's water. But here's the thing. Competition was introduced in Scotland to put control in the hands of the customer. It was intended to improve customer service, drive greater innovation, and lead to keener pricing.

That's led suppliers to help customers spot where they might be wasting water, and put a stop to it; or point out where they might be pumping waste water back into the public sewer in a way which will land them a hefty fine.

In turn, customers have cut £36 million from their consumption-related water bills, with associated carbon savings, and customer satisfaction has increased dramatically compared to pre-competition levels.

To give you an example, the public sector in Scotland, which procures water as a single entity under the Procurement Scotland framework, has itself saved £36m since 2010 by working with Business Stream. Over a year, that could pay the salaries of 1400 new teachers; or nearly 2700 lollipop people; or provide school meals for 110,000 pupils.

The Scottish Courts Service - clearly not an innately water-intensive organisation - has saved £270,000, including nearly £20,000 of reduced consumption. Water smart meters have helped that organisation spot water efficiency opportunities.

Those kinds of stories are myriad across the Scottish public sector, as well as the business community. And England has been watching.

After a number of false starts, where competition was promised and not delivered, the 'Water for Life' Water Bill which will shortly receive Royal Assent brings with it competition for businesses in England. Competition south of the border is due to be introduced in April 2017.

Currently, there are 21 regional monopolies across England. If you're a large multi-site retailer with outlets in every one of those, that's a lot of paperwork. Under competition, those kinds of organisations can choose one supplier for the lot, benefit from economies of scale, and strip away a swathe of expensive and unproductive admin into the bargain.

For Scottish companies with operations in England, there's an opportunity to get ahead of the game and test current English suppliers. Under the current market set-up, individual sites (not the organisation itself) which use more than five million litres, or five megalitres, of water each year are allowed to switch. Unfortunately this limits eligible sites to around 28,000 out of a possible one million.

Organisations with those kinds of sites could start looking at switching now, to test incumbents and test the water, as it were, on the switching process before competition comes into effect in 2017. They could also be looking at current water use and thinking about how it could be made more efficient, which ultimately has a direct impact on the balance sheet.

What this means is that water will become more than just a background issue, or simply a bill to be paid. A growing number of organisations are treating it as a business-critical consideration, even if water isn't really their core asset.

Telecoms business AT&T and Hershey's, the chocolate company, for example, recently said they would consider water scarcity and related infrastructure when looking at office locations. Sure, they're headquartered in California where drought is far more of an issue than it's ever likely to be in the UK - but the point it raises is the importance of water to business operations.

Competition should be a key driver in raising water up the agenda of every business, whether that's simply to ensure the best value for money, or address a business-critical issue like leaks or trade effluent.

That's happening in Scotland after six years of competition, and policymakers in England have taken the view that the benefits to customers merit changing the entire market there. That's no mean feat, and one in which I think we should all take at least a little pride.

Mark Powles is the chief executive of Business Stream.

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