Procurement 19 October 2016

How a small business owner can make the most of water deregulation

The government has predicted that water deregulation could save commercial customers £200m

As of April 2017, commercial customers of water providers in England will be able to select the water supplier that best suit the needs of the business. This deregulation of the water industry sees a step away from the current system that requires business owners to receive their water supply from just a designated local provider. 

In 2008, Scotland became the first country in the world to deregulate its water market. Research has suggested that in the following six years, £100m was cut from customer bills. 

The government’s official body set up to deliver a competitive water industry in England – Open Water – has estimated that deregulation will provide £200m worth of benefits to both business customers and the UK economy.

Here, head of energy at Great Annual Savings Group Dan Smith answers the questions of Business Advice readers ready for the deregulation of the water industry.

What will deregulation mean for small businesses?

Overall, water deregulation is a good thing for the owner of a small business. It removes the monopoly that the current suppliers have on the market, which will give company owners much more choice over who they use.

Deregulation generally has the effect of increasing competition and that’s a good thing, as shown by the deregulation of the UK gas and electricity markets a few years ago. Now companies don’t necessarily have to go to one of the “big six” and can choose from a wider pool of suppliers.

Deregulation of the water industry in Scotland has also been a success. Despite slow take-up initially, company owners have realised that it’s good practice to scour the market and switch supplier from time to time.

People have asked why England’s water industry hasn’t been deregulated before now, and they have point. Political instability has probably been a contributing factor – there have been several changes of administration since Tony Blair stood down as prime minister in 2007. There is also a possible fear that introducing deregulation when the economic outlook is uncertain could have an adverse effect on the markets.

What are the key changes?

Essentially, deregulation will allow companies to choose which retailer provides its water, waste water and sewerage services. Other than that, there shouldn’t be too much to worry about.

Water will still come through the same pipes, and supply should be uninterrupted. In the months and years following deregulation, more retailers will probably come into the market, although many may wait a while to see how the effects of deregulation play out.

The biggest changes will undoubtedly be a reduction in costs and an improvement in service quality. Retailers will have to do more to look after their customers due to increased competition in the market.

How are small firms expected to benefit?

As well as the cost and service benefits mentioned above, companies will be able to use the same retailer to look after its satellite offices around the country. This isn’t possible in the current climate. A company with sites in Newcastle, Edinburgh and East Anglia, for example, has to use three different suppliers who operate in those areas.

Using one retailer across multiple sites also significantly reduces the administrative burden for business owners. In the post-deregulation era they’ll receive one bill which covers all sites, rather than one bill for each site. 

What should business owners be doing to prepare for the changes?

The biggest mistake business owners can make is to wait until water deregulation happens before they do anything about it. They should analyse their firm’s current water consumption now, and understand how much and where across the business it is being used. Only then will they be in a position to take action to minimise outlay.

Soon, suppliers will be releasing their prices and retailers will quickly follow suit, possibly by the end of this year. This means that business owners need to be conducting internal cost audits now to make sure they’re in a position to take advantage of the retail prices as soon as the best deals have been released.

What effective cost-cutting measures can a business owner make?

Using a reputable energy efficiency company can reduce costs and hassle, and enable busy company owners to focus on the day-to-day running of their business.  Business owners can carry out water audits and identify potential cost savings now, meaning they will be in a position to negotiate the best post-deregulation deals for customers as soon as they’re available.

What are the negatives of water deregulation?

There’s nothing bad about water deregulation for business owners if they do something about it. If they just stay with their current supplier without investigating other possibilities, other companies will jump ahead of theirs and grab the best deals. By taking action, they could potentially save their business significant amounts of money.

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