The crisis facing the UK water sector is not a problem solely about the environment or regulation, or even necessarily about water. It is in some ways a litmus test of how private sector (or even mutual/charity) owned infrastructure can maintain public trust when pressure from civil society and the media becomes political – think social housing after the Grenfell fire, or energy in the run up to the price cap.
Recent government responses are in large part a reply to public and political unease. But the heart of the problem goes deeper: what is needed from a private monopoly industry supplying an essential of life, along with changes to regulation, to repair and retain trust? Without fundamental change, calls for a different model including state ownership, are unlikely to disappear. If there is a change in Labour leadership, they may grow and could lead to a broader contagion across UK utilities and infrastructure more widely.
The Government approach, following the Cunliffe review, primarily focusses on refining existing models, through proposals for tougher enforcement, clearer regulatory expectations, and greater transparency. Cunliffe was right that whatever the merits of the case, a reset requires a sacrificial victim – in this case Ofwat – and transparency is non-negotiable. But this alone could look more like rearranging the deckchairs on the Titanic, rather than a response to the crisis in legitimacy. The sector needs to move to an approach where actions are less exclusively defined by the regulatory system. Regulators must promote the flexibilities – outcome-based approaches, earned autonomy and regulatory culture – which enable this which requires a measure of courage which has been lacking.
To achieve credibility, a private owned monopoly utility must go beyond minimum compliance and demonstrate visible leadership accountability
Public scepticism towards the sector is rooted (however unfairly) in perceptions of a fundamental imbalance between private profit and public good. The erosion of trust is structural, reflecting how institutions function in practice as much as how they communicate with the public, and extends beyond water to other regulated infrastructure sectors. Poor credibility leads to greater regulatory volatility and exposes long-term investment to reputational and policy risks, making water’s current predicament a warning for all utility industries.
To achieve lasting credibility, a private owned monopoly utility must go beyond minimum compliance and demonstrate visible leadership accountability. Executives and boards need to take ownership of systemic issues, openly communicate the difficult trade-offs that infrastructure delivery entails, and accept responsibility when outcomes fall short. Governance needs to be more inclusive with boards drawn from a wider section of society and greater visible third-party access and assurance.
This is not just for companies. Political trade-offs need to be set by government rather than being left to unelected regulators. Regulators need to create honest dialogue around the complex balance of cost and public outcomes. Environmental and societal outcomes are shaped by a range of actors, so rebuilding trust requires genuine cross-sector collaboration rather than operating through vertical regulator industry interfaces.
For business leaders, it signals a commitment to leading change, and for consumers, it demonstrates that their voices are being heard. In summary, the recent government reforms are steps in the right direction, but there is much more to do. Government need to own political trade-offs; regulators need to create the climate for more autonomy in the industry; and industry needs to respond with genuine and transparent leadership and commitment to public purpose.
The opportunity to rebuild trust remains open, but as each cycle of incremental change passes, legitimacy becomes harder to recover.
