The water industry in the UK was privatised 20 years ago, but when you compare it to the energy industry - which was only privatised just over a decade ago - the difference is clear to see.

Image by WhatMeWorry101 via Flickr.

Businesses can - and do - switch their energy supplier, but when it comes to water, it’s almost unheard of. 

Given how central a reliable, affordable water supply is to our economy (it’s essential for industry, agriculture, energy production and more) it’s surprising that it’s often taken for granted, particularly given that climate change could mean water scarcity becomes an even bigger issue in the future. 

It was against this backdrop that Defra released its Water for Life White Paper last month. It presents a vision for the future of the water sector, including some interesting proposals for businesses, which fall in two main areas: water abstraction and competition.

Water abstraction

Businesses that take water from rivers, lakes, streams etc (more than more than 20 cubic metres a day) need an abstraction license. But Defra acknowledges that currently it can be difficult for businesses that want to start water abstratcion or increase their water abstraction to get a year-round reliable license.

The White Paper proposes that a better market in abstraction licenses would make it easier for businesses to access water in the volume and the location they need.

Competition

At the moment, only business customers in England that use 50m litres or more of water a year can switch their water or sewerage supplier under the ‘inset’, ‘water supply licensing’ or’ ‘new appointments and variations’ regimes - but it doesn’t happen often. In fact, only one business has switched supplier under the water supply licensing regime.

In Scotland, there’s an alternative regulatory regime, which is much more like the energy market. It has seen over 40% of businesses renegotiate the terms of their contract with their water supplier to get better prices and/or service, including discounts for paying by Direct Debit, aggregated purchasing, more information on water usage, and innovative schemes like rainwater harvesting. There have been estimated savings of £20m in three years, and apparently it makes businesses more water-efficient too. The report cited an example of one business with multiple sites which saved an impressive £80,000 a year just by aggregating the 4000 paper bills it used to receive into one e-bill.

To help get businesses switching, Defra has introduced new legislation which will lower the switching threshold to 5m litres - which will mean that the number of businesses which are eligible to switch water supplier will increase from 2,200 to 26,000. The White Paper says that further deregulation is on the way.  

There are also proposals for ways to get new players to enter the market, so that business customers have a greater selection of water companies to choose from.

What do you think of these proposals? Would you ever consider switching your business’s water supplier? Let me know your thoughts and experiences in the comments.

by James Constant

Take a look at this interview with the subject of tonight’s Undercover Boss, npower’s Kevin McCullough, from our sister site uSwitch.

by James Constant

Rejection rates for small businesses applying for bank loans have increased sevenfold since the banking crisis struck. That is the shocking finding contained in the independent study ‘The SME Finance Monitor Report’ which also shows that:

• Companies with nine or fewer employees are three times more likely to be refused loans than companies employing between 10 and 249 people.
• Businesses seeking new funds are less likely to receive loans than those renewing debt.
• Only 58 per cent of loan applications are granted immediately, down from 85 per cent in 2007.

Rather worryingly the British Bankers' Association said the survey’s results were “encouraging”, adding “It clearly pays to have a strong, ongoing relationship with your bank, as existing customers [are] rarely turned down”

Well that’s great news for the 58% of businesses who get a loan granted immediately (how much use is a deferred one anyway?) and who employ tens or hundreds of staff and who are rolling over an existing facility.

But what about the rest of us...? the start-ups? the less than 10 employee businesses looking to grow with the help of much needed working capital? the established businesses who have never had to take on debt but in the current climate need all the help they can get to just survive?

How this all squares with Project Merlin (under which the banks have committed to lending more money in 2011, especially to small businesses, to pay less in bonuses than they did last year and to be more transparent about their pay packages) is unclear.

It’s all well and good to tell us how beneficial a strong relationship with your bank is, but while that's something every SME wants, there are plenty of banks which have no interest in engaging with businesses such as those I just mentioned.

Ultimately, as we have said for a long time now, small businesses can only rely on themselves to make things better and cost control is a key element in achieving this. Whether it is negotiating better terms on your business energy, or it's investing in technology to drive efficiencies, there is always an opportunity to improve the bottom line. Then maybe, just maybe, it will enable you to present yourself as the kind of business the BBA deems to be acceptable for their members to take a risk on... well, Merlin was a magician once upon a time wasn’t he? Gosh, a whole blog on banks and no mention of tax payers money and the irony of them telling us how to run a prudent business.... let’s not get started on that one

by James Constant

The return of the ‘push me, pull you’

So Chris Huhne the energy secretary has finally announced “a package of far-reaching reforms in the biggest shake-up of the electricity market since privatisation”.

In a stark warning of the choice ahead he exclaimed “We have to stop dithering – you can have blackouts or you can have investment”.

Not much of a choice when you consider the estimated £110bn bill is the equivalent of £30 million a day for 10 years. And that’s where the ‘push me pull you’ comes in.

Already we’ve seen the CEOs of EDF, SSE, Npower have their two penneth on who is going to pay and how, not to mention the CBI, EEF manufacturers association or the generators themselves like Drax or the legions of renewable developers.

Cutting through the political bluster and ignoring the scare-mongering of black-outs, the only thing that is certain is that energy costs are going to increase for businesses.

There’s nothing new in that you might say but the influence over the inexorable price rises is not just the world energy markets this time, the additional spectre is of government mandated expenditure on a level never before seen by the industry or the customer.

The platitudes that pain early means long term security of supply and ultimately lower prices than we’d experience in the alternative apocalyptic scenario is cold comfort for UK businesses faced with the promise of significant price rises.

Luckily you don’t have to speak to the animals to give yourself some relief from the coming tidal wave, fix your business energy costs to protect your business cash flow.

Three years secure in the knowledge that your prices are protected has never been more attractive