Long term review sets out pressing need to modernise water infrastructure to address future challenges

Improved infrastructure to boost economic growth across the UK and meet climate goals is both achievable and affordable if the right policy steps are taken now, according to the government’s independent advisers on infrastructure strategy.

The second National Infrastructure Assessment – a five yearly review conducted by the National Infrastructure Commission – sets out a programme of transformation for the country’s energy, water and other key networks over the next 30 years.

Its recommendations in relation to the water sector include:

  • Closing the water supply gap by building additional water supply infrastructure and reducing leakage, while introducing compulsory water metering as part of efforts to reduce water demand
  • Devolved funding to local authorities to work with relevant agencies on developing joint surface water flood risk plans, underpinned by data sharing to help protect more properties from this growing risk
  • A long term stable programme of investment in river and sea flood risk management over the next 30 years, with measurable targets to reduce the number of properties at risk.

The report is upfront about the need for significant public and private investment in infrastructure if the UK is to rebalance its economic geography, meet climate obligations, improve resilience and enhance the natural environment.

The scale of the challenges to increase water supply, reduce demand, and tackle pollution mean the Commission projects that private sector investment will need to rise to around £12 billion per year from 2025 to 2030, before reducing to around £8 billion per year from 2030 to 2050.

Attracting this investment to the UK in the face of global competition will require a new approach, says the Commission:

  • Policy stability: setting out a clear plan and sticking to it, to lend certainty to investors and help build up supply chains
  • Pro-investment regulation: clear guidance from government on priorities, investment ahead of need and business models to support emerging technologies
  • Speeding up the planning system for major projects, particularly energy transmission schemes: with regularly updated National Policy Statements from government, strategic spatial planning, more effective sharing of environmental data and clearer community benefits in return for hosting key infrastructure.

The Assessment also sets out the likely impact of the Commission’s recommendations on households, where private investment is recouped through infrastructure service bills. Despite likely increases in water bills, it finds that the average household will save at least £1,000 per year by the mid 2030s compared to today, largely driven by the transition away from fossil fuels onto cheaper low carbon electricity.

The report draws on two years of analysis, expert engagement and public research, resulting in what Commission Chair Sir John Armitt labels “probably the most comprehensive assessment yet of the infrastructure costs associated with supporting regional growth and reaching net zero”.

Water recommendations: further detail

On water supply, the Assessment restates the Commission’s projected water supply gap of at least 4,000 mega litres per day by 2050, and calls for action to cut usage and increase supply by:

  • Through the Regulators’ Alliance for Progressing Infrastructure Development and Price Review process, ensuring that at least 1,300 mega litres per day is provided by the mid 2030s through new transfer and supply infrastructure
  • Continued progress towards the water industry’s objective to halve leakage from 2017-18 levels by 2050
  • Enabling companies to implement compulsory metering beyond water stressed areas by 2025, requiring all water companies to roll out smart meters systematically as a first step in a concerted campaign by 2050 to reduce water demand to 110 litres per person per day.

To address coastal and river flooding, the Commission proposes that the Environment Agency’s National Flood Risk Assessment process could be used to track progress against reducing the number of properties at risk of flooding. Whilst it should allow for local variation, government’s ambition should take an annual likelihood of 0.5 per cent (and 0.1 per cent for densely populated areas) as a starting point for the target. The Assessment stresses the value of nature based and catchment solutions in helping deliver this protection level, and the importance of funding wider resilience measures to prepare for and recover from flooding.

On surface water flooding, the Assessment sets out recommendations to reduce the number of properties in the highest risk areas, which currently number around 325,000. Climate change and population growth could increase this by up to 70 per cent, while the expansion of impermeable surfaces could further increase risk by up to 20 per cent. The Commission restates its recommendations from its November 2022 report on the subject, starting with government establishing a clear long term target to reduce the number of properties at risk. Flood risk management authorities should develop single joint plans to deliver these reductions, says the Commission, supported by devolving funds from national budgets with local public and private contributions.

Building on government’s plans for all new major infrastructure projects to achieve biodiversity net gain, the Assessment suggests that certain sectors – including water and flood management – could go further by taking a more strategic approach to maintenance of existing infrastructure. The Commission recommends that infrastructure operators in these sectors should publish regular reports on the state of environmental water quality and biodiversity on their estates or affected by their assets, and develop maintenance and renewal strategies to improve these. This process should be supported by Ofwat, working with the environmental regulators, to inform operation, maintenance and renewals activities in 2030-35.

The report also stresses the importance of ensuring that the future telecommunications needs of the water sector are identified, given the role of digital connectivity in delivering critical functionality and strategic objectives. The Assessment recommends that plans are developed to ensure that digital infrastructure, such as dedicated networks or spectrum allocation, is delivered to meet the identified requirements by 2030 at the latest.

More broadly, noting that most assets that will be operating in 2055 have already been built, the Assessment calls for government to set outcome-based service standards for all infrastructure networks. Operators should be required to set out the costs of meeting these standards while adapting their networks to climate and other risks, to inform future regulatory and funding settlements.

In other cross-cutting recommendations, the Commission recommends that public spending frameworks for infrastructure are reformed to encourage more effective project management. The Assessment calls for fixed multi-year budgets for major projects, where money can be moved between years to avoid the illusion that delay saves money; and for the largest projects to have their own ‘project expenditure limit’ to protect smaller projects that sit within the same government department.

Writing in the report’s foreword, Sir John Armitt, Chair of the National Infrastructure Commission, said:

“The good news is that modern, reliable infrastructure can support economic growth, help tackle climate change and enhance the natural environment.

“We stand at a pivotal moment in time, with the opportunity to make a major difference to this country’s future. But we need to get on with it.

“People often talk about infrastructure as the backbone of our economy: what our infrastructure needs now is the collective mettle to turn commitments into action that will reap rewards for decades to come.”

Dr Richard Benwell, CEO of Wildlife and Countryside Link, said:

“Poorly planned or badly designed infrastructure can destroy ecosystems and hasten the decline of nature. It is excellent to see the NIC recognise this potential for harm in the report, reinforce the case for early mitigation action, and call on Government to require key sectors to contribute to nature recovery and employ nature-based solutions across their operations. Ultimately, all polluting sectors will need a Nature Recovery Obligation to contribute to restoring our environment; the measures identified by the NIC are a positive step toward managing and reversing harm from necessary infrastructure development.”

Government is expected to respond formally to the Assessment within 12 months.


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