The UK’s forgotten utility

UK businesses may be eager to cut costs yet continue to overlook the water utility bill. Josh Gill looks at the opportunities available and the role brokers can play

The economic challenges facing UK firms have no doubt reignited the drive to identify any opportunity to cut business costs, improve efficiency, and reduce waste. As inflation skyrockets and the war in Ukraine rages on, most UK firms are understandably fearful of the looming cost crunch brought on by a rise in energy bills and other critical supply costs.

Electricity and gas supply has dominated conversations around commercial utility costs. Curiously, little comparative discussion surrounds the costs of commercial water supply. While water utility costs make up a smaller proportion of overall running costs, we have seen increases recently in rates for wholesale water and retail water default rate. Additionally, a sizeable 6 per cent of the UK’s carbon emission can be attributed to water use.

Given the widespread desire from UK businesses to lower supply costs, both from a financial and environmental perspective, it is worth fully considering the untapped opportunities in the UK’s water and wastewater retail marketplace.

The water utility bill is so often an overlooked business cost because, until recently, the power of choice was mainly out of the hands of businesses through regulations mandating the exclusive use of local water suppliers. The deregulation of the industry in 2017 opened the floodgates, creating the world’s largest competitive water and wastewater retail market. This empowered businesses to switch providers/renegotiate their contracts via water utility brokers when they were dissatisfied with services provided, injecting much-needed competition among retailers and delivering two clear benefits.

One of the driving factors behind creating an open water retail market was the desire to help businesses secure savings on water rates, both by allowing them to switch from default contracts to fixed contracts and by incentivising retailers through competition to offer increasingly attractive rates. Annual data from Ofwat illustrate that the desire to lower bills has been the primary driver behind business customers’ decision to switch between retail providers. According to Ofwat, nearly half of all business customers (45 per cent) felt that savings equal to, or less than, 10 per cent would entice them to switch providers and the annual saving rate made by customers switching in 2020/21 provided this desired level of saving for all firms that made a move.

Naturally, the financial savings will often depend on the size and consumption levels of the business; however, beyond providing the ability to fix water costs, the water market has also delivered highly improved cost-saving services for many businesses. The Consumer Insight Survey 2021 showed that one-in-three businesses that switched contracts reported timesaving in the payment of water bills, particularly customers with multiple sites across various regions who were able to consolidate their bills across multiple premises.

The deregulation of the water market provided the opportunity for a level of increased competition that not only delivered financial cost-savings but greater innovation and a refreshing focus on sustainability. With an open market, Everflow was able to identify and seize a gap in the market for a sustainability-focused water supplier capable of using technology and reducing the environmental impact on its customers.

Additionally, we work with industry bodies and regulator to make water smart metering more widespread. We believe that only when businesses are fully aware of their usage, as they are with their electric and gas usage, will they be able to identify problems (i.e., inefficient appliances) and address the issue.

Ultimately, the benefits of an open water market – including innovation, improvement to services and lower prices – require intense competition driven by customer engagement in the market. Without customers the competitive incentive will quickly dry up along with the desired benefits. Thankfully, since the market opened, there has been an upward trend in awareness of the need and the ability to switch providers. Nevertheless, the level of engagement is far below other utility markets with CIS 2021 finding that only 9 per cent of all customers in the water market had been active in the prior 12-months.

Raising awareness among business customers is crucial and this is where water utility brokers play their crucial role. Such brokers can provide UK businesses with the insights and advice needed to navigate the unchartered waters of this new marketplace. Unfortunately, in the aftermath of deregulation, little was done to incentivise utility brokers to engage in the water market properly; the system was disjointed, complicated, and delayed. This was a key issue Everflow immediately sought to address. Our commitment to brokers can be seen through our investment in innovative technology, providing brokers with the tools to make switching customers as cost-effective and straightforward as possible, therefore incentivising their crucial participation in this ecosystem.

Since its inception five years ago, the water retail market has made significant strides forward with fantastic new tools and support quickly emerging from this new space – driven by brokers, wholesalers, and retailers – delivering fantastic real-world savings for businesses. There is certainly more to be done to achieve a more cost-effective and sustainable market, and there is no doubt that improved customer engagement via brokers will be the driving factor going forward. You can lead the horse to water, let us hope it drinks.

• Josh Gill is CEO and founder of Everflow