The water sector in the UK: The AMP6 and AMP7 period

The water sector in the UK: The AMP6 and AMP7 period

Originally, the water sector in the United Kingdom was controlled by the Government. It was not until 1989 that privatisation of state-owned enterprises by Margaret Thatcher’s led government resulted in the control of the water industry by the private sector.

 

However, regulation of the factors that affects the water industry fell into the hands of the non-ministerial government department, Water Services Regulation Authority which was preceded by the Office of Water Services (OFWAT). The wave of privatisation that swept through the water industry led to the initialisation of a time-period that occurs every five years known as the asset management plan (AMP) period. This five-year timeframe allows the Water Services Regulation Authority to make acceptable price reviews for privately managed water companies and evaluate key performance indicators.

 

During the first four asset management plan periods, the focus was on upgrading water facilities that were initially managed by the government to not fall short of expectations as regards the strict limits imposed by the European Union. Financial resources were channelled into the erection of new infrastructures and putting existing facilities in order. In AMP5, the aim was to reduce operational cost to the minimum while optimising the utilisation of existing assets. It was predicted that the AMP7 would essentially be a continuation of the AMP6 regarding its objectives. By the end of AMP6, it is predicted that customers will no longer have to wait for extended periods before being supplied with water.

 

At the beginning of AMP6, there was a feeling of optimism among players in the water sector’s supply chain. This feeling was aided by the introduction of the Cyclicality Working Group which brought OFWAT, water companies, trade unions, and supply chain workers under one umbrella to find solutions to the “boom and bust” cycle of investment. This cycle was indicated by a time when expenditures was at its peak, usually during the middle 12-18 months of the period before tailing off. The result is that construction companies lost 40% of their staff in the “winding off” phase with no hope that they will get back their jobs when the next AMP period begins. However, many contractors and suppliers started having mixed feelings towards the end of AMP6.

 

Nonetheless, there is still a lot to benefit during AMP6. Presently, there are a lot of capital projects underway. Notable among them are the Thames Tideway Scheme and the Birmingham Resilience Project. The Thames Tideway Scheme kicked off in 2016 and is expected to end by 2023 with an estimated cost of 4.2 billion pounds. On the other hand, the Birmingham Resilience Project which started in 2017, will be completed by the end of 2019 with an investment of around 300 million Pounds. The main objective being that Birmingham will have a major source of water supply from Wales with a backup supply from across the region.

 

While AMP6 is underway, the water industry has already started making preparations for AMP7. The objective during AMP7 is to better the environment by paying more attention to the quality of water bodies. It is being expected that every project that has been set out to be accomplished during the AMP6 period will not extend into the AMP7 period.

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