Procurement · 3 April 2017

Small business owners promised share of £200m water deregulation savings

Water deregulation
Water deregulation allows small business owners to choose a supplier outside the most local provider

Small business owners in England will benefit from a savings windfall of £200m as a result of water deregulation, according to market watchdog Ofwat.

Deregulation of the water utility market, introduced on 1 April 2017, means business owners across England can now select the water supplier that best suits their company’s needs.

The changes allow owners to buy water from outside of the local supplier, while companies based in various sites across the country will be able to use multiple water providers.

Ofwat also claimed greater competition from deregulation would drive up standards for business customers and encourage innovation.

Scotland became the first country in the world to deregulate its water market in 2008, and research suggested £100m was cut from customer bills.

In a statement, government environment secretary Andrea Leadsom welcomed water deregultation and said business owners could now “find the water deal that works best for them.”

“Opening the market is an historic milestone, paving the way for innovation and efficiency and giving customers the same choice over their water retailer as they currently have for their energy and other essential services,” Leadsom said.

The new system entitles micro business owners to a seven-day “cooling off” period after signing up with a new water provider, preventing suppliers from enforcing a contract. A voluntary code of conduct has also been introduced for suppliers and the Consumer Council for Water has pledged to provide support for small firms switching services.

However, research from customer consultancy Utilitywise suggested deregulation will benefit larger companies and offer little benefit to owners of small firms.

According to Utilitywise, the average small business owner will make a one-off saving of just £80.

In a statement, Utilitywise CEO Brendan Flattery urged Ofwat to deliver value to small firms through price revaluation.

“The Scottish water market deregulated in 2008 with similar low margins. The regulator then had to intervene after three years, widening the retail margin to allow savings of more than 20 per cent for all businesses. Since the intervention, around 50 per cent of businesses have switched,” said Flattery.

Cathryn Ross, Ofwat chief executive, argued that eventual success of water deregulation in Scotland demonstrated the potential benefits to small business owners in England.

“If you look, for example, at how competition progressed in Scottish market you can see that SMEs have benefitted from competition. It did take longer but we are confidently expecting SMEs to become an attractive part of the market for some providers,” Ross said in a statement.

One supplier has already emerged as a winner of water deregulation. Between 6 March and 24 March, SES Water secured a quarter of switch requests from business owners across England, approximately 7,500 customers.

Further research has suggested that government and suppliers must do more to raise awareness of the changes if small business owners are to benefit from water deregulation.

A survey from Make it Cheaper revealed almost half of all business owners spend over £1,000 on energy every month, while a fifth were completely in the dark over how much the price of their bills.

In response to low awareness, Nick Heath, head of energy insight at Make it Cheaper, said: “There is a common misconception that changing energy suppliers for your business is an arduous task, yet it couldn’t be further from the truth. Getting a quote is quick and simple, you just need your current meter reading and a few personal details.”

Find out which energy providers all micro business owners need to avoid

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Praseeda Nair is the editorial director of Business Advice, and its sister publication for growing businesses, Real Business. She's an impassioned advocate for women in leadership, and likes to profile business owners, advisors and experts in the field of entrepreneurship and management.