UK's Water Market Deregulation and Its Impact on Businesses

Along with many other formerly state-owned businesses in the UK, the water industry has been deregulated. While this hasn’t made a great deal of difference to domestic water users, it certainly could to businesses. While domestic users aren’t able to change their suppliers, businesses are, and this could lead to substantial cost savings. 

What is Water Market Deregulation?

Deregulation in the water industry refers to reducing government control, allowing market forces to determine prices and services. In England, deregulation began in April 2017, enabling businesses, charities and public sector organisations to choose their water retailer instead of being tied to a regional monopoly. This was intended to foster competition, lower costs, and improve service quality. In Scotland, deregulation has existed for longer, since 2008, allowing all non-household customers to switch providers. The market in Wales is different, with only very large businesses able to switch.

The Benefits and Drawbacks of Water Deregulation for Businesses

Businesses can shop around for better rates, potentially reducing water bills. Deregulation increases the number of suppliers, offering more choices and tailored services. But this freer market also brings with it potential risks. Market competition can lead to price volatility, making budgeting challenging. Switching suppliers might result in less reliable service if new providers lack established infrastructure. 

Water Deregulation Across the UK

• England: Deregulation began in April 2017, allowing all businesses, charities and public sector bodies to choose their water and wastewater retailer. This open market, regulated by Ofwat, aims to foster competition, lower costs, and improve service quality.

• Scotland: The business water market has been deregulated since 2008. All non-household customers can switch their provider, leading to a mature competitive market with a track record of cost savings and service improvements.

• Wales: Only businesses using more than 50 million litres of water per year are eligible to switch their retailer. For all other businesses, the market remains regulated and tied to the regional supplier.

• Northern Ireland: The business water market is not deregulated. Businesses cannot choose their supplier and are served by the publicly owned Northern Ireland Water, which sets charges for water and sewerage services.

This has had significant implications for businesses. Those in England can now compare and switch suppliers to find better deals, potentially reducing costs. In Scotland, businesses have already experienced these benefits for many years. In Wales, however, the opportunity to switch is limited to a small number of very high-volume water users.

How Can Businesses Take Advantage of Water Deregulation?

Businesses can take advantage of water deregulation by shopping around for better deals, negotiating contracts with suppliers, and switching to providers offering competitive rates and better-tailored services. This can lead to significant cost savings and improved service quality.

Certain steps should be taken to renegotiate your water contracts. Review your current contract, paying particular attention to its terms and end dates. Research the market by comparing offers from different suppliers.

You can use competitive quotes to negotiate better terms with current or new suppliers. But price shouldn’t be your only consideration. Research any potential new supplier’s reputation and customer feedback, consider their service reliability and customer support and look for value-added services like water efficiency advice.

Of course, price is still very important, so make sure you fully understand competing tariffs before comparing them. Pay particular attention to the difference between fixed and variable charges. To get the best value from any new supplier, you’ll need to understand your usage patterns and analyse your water consumption patterns to find the most suitable tariff. Be aware of any additional costs like meter readings or service charges.

The Future of Water Deregulation in the UK

The deregulated water market in the UK is expected to continue evolving, with increased competition driving innovation and better service offerings. Businesses should watch out for potential price fluctuations and choose reliable suppliers to avoid service disruptions. 

Frequently Asked Questions

Can I switch water supplier if I run my business from home?

It depends on how your property is billed. If the main use of your premises is for business purposes and it is subject to business rates, you are likely eligible to switch. If your property is primarily domestic and pays council tax, you will remain on a domestic tariff and cannot switch. The key factor is the ‘principal use’ of the premises. If you are unsure, check with your current supplier or the water regulator, Ofwat.

What happens when I switch supplier? Does my water get cut off?

Nothing physically changes. The same regional wholesaler still owns and maintains the pipes and is responsible for the quality and delivery of the water to your tap. Switching only changes the retailer who manages your billing and customer service. There is no interruption to your supply.

Is Northern Ireland’s business water market going to be deregulated?

There are currently no plans to deregulate the non-household water market in Northern Ireland. Businesses there continue to be served by the state-owned Northern Ireland Water.

There are certainly both risks and benefits to changing water suppliers if you run a business. Water is essential for all businesses; you can’t risk disruption to your service, and failing to compare suppliers properly when choosing a new one could cost your business money. But done properly, moving suppliers could both improve your service and save you money. Review your water supply arrangements; the benefits could soon start pouring in.