While the water market has been deregulated for domestic customers for some time, commercial customers have only benefitted from deregulation since April 2017. Changes in legislation at this time meant that UK businesses were free to purchase their water supply from any regulated providers in their area.
Prior to this, businesses in England and Wales using under 5,000 cubic metres of water per year were unable to choose their water supplier. However, businesses in Scotland have enjoyed the benefits of deregulation since 2008. Increasing numbers of businesses are switching providers each year and enjoying savings of hundreds or even thousands of pounds each year.
The benefits of switching suppliers
The objective of water market deregulation is to allow consumers to benefit from increased competition. The removal of market constraints means that suppliers are constantly striving to service both commercial and domestic customers with lower water rates. While water companies will market themselves to businesses, the onus is on individual companies to compare prices and switch contracts as and when they see fit.
Since deregulation, multi-site businesses have been able to benefit from having a single supplier to administrate each of their properties. Let’s take a retail chain as an example. Before deregulation, a retailer with 20 different stores around the country might have had to deal with 20 different water suppliers. Since legislative changes in 2017, businesses have been able to consolidate these fragmented bills into one simple, national agreement.
A brief history of energy & business water deregulation
While the deregulation of the water industry is relatively new, the UK witnessed large-scale deregulation of other utility markets in the 1990s – first with gas (1998), followed by electricity (1999). Energy price controls were even further relaxed in 2002. Since then, wholesale market prices for utilities have tripled. The knock-on effect is that annual utility bills have tripled for businesses, too. Despite this, the data suggests that approximately 40% of business customers still haven’t switched suppliers.
Most utilities are purchased from the wholesale market by utility providers and then resold to businesses. While some utility companies produce their own fuel, it’s important to understand the fundamental differences between the water and energy markets.
For example, the UK is a net importer of electricity and gas. Energy prices are therefore subject to exchange rates and external market forces. Political instability, such as Brexit, can affect energy rates hugely (after the Brexit referendum of 2016, the wholesale energy market increased by 33%).
In contrast, water in the UK is naturally occurring. Rainwater which lands in reservoirs is treated and piped directly to site, so there’s no requirement to import anything. Water companies in the UK generally compete based on how much it costs them to both provide drinking water and treat wastewater/sewage.
Water prices and tariffs in 2020
The calculations below demonstrate how much small-medium enterprises can expect to pay for water each year with the top ten suppliers in the UK. These calculations do not include additional extras such as surface water, highway drainage or plumbing/drainage insurance.
For small businesses, these are the water suppliers which offer the best value for money, based on 200 cubic metres of consumption per year:
• Thames Water: £492
• Severn Trent: £559
• United Utilities: £594
• Northumbrian Water: £602
• Yorkshire Water: £602
• Anglian Water: £666
• Southern Water: £744
• Wessex Water: £838
• South West Water: £1,125
• Business Stream: £1,165
The following utility companies offer the best deals for medium-sized businesses, based on 1,500 cubic metres of consumption per year:
• Thames Water: £3,275
• Northumbrian Water: £3,490
• Severn Trent: £3,746
• Anglian Water: £4,102
• United Utilities: £4,175
• Yorkshire Water: £4,200
• Southern Water: £5,147
• Wessex Water: £5,729
• Business Stream: £6,915
• South West Water: £7,951
There are currently large differences in the tariffs offered by leading water providers for small and medium-sized businesses. As the table shows, the differences in price from lowest to highest is over 34%, or £4,676 per year.
In theory, this provides wiggle-room for the cheapest suppliers to increase their costs, with the most expensive suppliers competing by reducing their prices. However, it is likely that price differentials will remain for some time, on account of many utility companies having a regional monopoly. For example, United Utilities is the only utility company operating in the North West of England, which means that despite deregulation, businesses in this area are unable to choose another supplier at present.
Why your business should switch water suppliers
Switching water suppliers is more than about simply finding the cheapest utility company. In addition to saving money on your bills, you could also benefit from improved customer service, expert advice on how to use less water, and a tailored service designed to suit the needs of your business.
Switching water suppliers is relatively easy. If you live in an area which is served by more than one water supplier, you should consider using a price comparison tool to see just how much you could save.
How long will it take for my business to switch water suppliers?
It takes around 28 days on average to switch water suppliers. However, this time frame can vary depending on how many sites you have, the complexities of your water contract and whether your business has any specific water needs. For example, if your business is involved in agriculture or manufacturing, you might be more likely to have more complex water requirements.
Is the water market likely to become more regulated in the future?
The water market is currently still in the early stages of deregulation. Whether you can benefit from regulation at the moment is something of a postcode lottery. However, if you live in an area with several different water suppliers, your business could save thousands simply by switching to an alternative provider.
To find out the best business water rates for your area, why not use a free comparison tool? Since 2017, thousands of UK businesses have benefitted from lower water/wastewater rates, better customer service and peace of mind that the solution to any water-related issues is just a phone call away.