We have seen all of this before. In the build-up to AMP7, there were four separate appeals that took place, which involved Anglian Water, Bristol Water, Northumbrian Water, and Yorkshire Water. The process overseen by the Competition and Markets Authority, or CMA, lasted an entire 12 months to reach a final decision. After this lengthy evaluation, the judgement delivered by the CMA led to only minor uplifts in the expenditure allowances for the companies involved, ranging from 2.1% to 6.6%.

I have little doubt that the industry and its ecosystem, much like us at Water by Murray, share a common desire for a swifter resolution to the ongoing situation—perhaps aiming/hoping for a timeline of around six months. In the context of the post-COVID environment, this timeline could possibly be achievable. However, I acknowledge that this might be an overly optimistic perspective. The scale of the appeal we are discussing is significant; it encompasses, and effects, more than half of all households in the United Kingdom. Additionally, the disparity between the requests being made and the rewards offered in the AMP8 determinations highlights fundamental challenges within the sector. These challenges are not only more pronounced, but they also emphasise the urgent need for a successful AMP period. Notably, this appeal is the largest one we have seen to date, with six different companies formally requesting a review of the determinations made:

• Anglian Water

• Northumbrian Water

• Thames Water

• Southern Water

• South East Water

• Wessex Water

Chris Walters, Senior Director for the Price Review at Ofwat, said:

“As part of the standard process underpinning our Price Reviews, it is the right of companies to request a redetermination by the CMA. We will be re-stating our case as part of this process… Our PR24 final determinations unlock a quadrupling of investment by the sector. This will accelerate the delivery of work to deliver cleaner rivers and seas – as well as securing long-term drinking water supplies for customers. Final determinations were based on a robust examination of all funding requests made by companies to ensure every pound of customer bills provides value for money, delivers real improvements and enables the sector to attract the investment it needs.”

Our extensive experience and keen insights lead us to understand the Price Review process as one that is primarily centred around investment, budgeting and achieving tangible results. We often hear from various stakeholders that there is a significant lack of thorough analysis and due consideration given to the ‘how’ and what it takes to deliver an AMP cycle. It is this aspect that plays a crucial role in the decisions to pursue an appeal. One could assert that this all ties back to the concept of 'resources,' which encompasses a wide range of elements in its layered and pertinent forms.

It is clear that both OFWAT, along with various stakeholders involved in the industry, anticipated this level, volume, of appeal. Given this expectation, it would be reasonable to hope that the CMA, would also have been prepared for this possibility and be equipped to facilitate a process that will be swift and efficient, allowing for a resolution to the appeal without unnecessary delays or complications.

As we approached the end of the AMP7 cycle, we witnessed a gradual winding down of activities that characterised the previous phase and a proactive move to focus on the preparation for AMP8. In this context, the frameworks and the Supply Chain have been collaborating closely to develop comprehensive resource plans. Their goal has been to assess the anticipated human resource needs for the future projects. Equipped with this crucial information, they have started to construct and frequently commit to a robust resource pipeline that aims to meet those needs effectively.

However, over the past month, we have observed a noticeable ripple effect throughout the market. A variety of work streams and programs have started to slow down, and in some cases, certain initiatives have been put on hold indefinitely. This trend is quite concerning, as the extent of budget cuts and the reallocation of financial resources have exceeded our initial expectations. The supply chain sector has been particularly impacted; it is experiencing significant pressure as it is relied upon for support even while facing economic strain. Consequently, the timelines for engagement and delivery of projects are either being extended or remain shrouded in uncertainty. This situation raises questions about the stability of future operations and the capacity of our teams to respond to upcoming challenges.

As one might anticipate, the current situation has had a considerable impact on the labour market. There is a noticeable level of inertia that is affecting hiring and job placements within the industry. This situation will likely result in a negative effect on the Water Sector's ability to access, and hold on to, vital resources, both in the immediate future and over the longer term.

On a broader, macroeconomic scale, this trend will shape public perception of the sector, leading many individuals to question the reliability and safety of their current jobs, as well as their potential career paths within this field going forward. It is also important to note that our sector is currently facing significant resource challenges, with approximately 35% of skilled positions remaining unfilled. This upcoming AMP cycle is much larger in scope and complexity than previous ones, yet we find ourselves already struggling against the issue of 'drift,' which could further complicate our efforts to move forward effectively.

The promise that existed in the build-up to AMP8 has taken a hit and, whilst we sit in this state of inertia, will continue to dissipate. Both the labour market and the supply chain must prepare themselves for what is expected to be a challenging journey ahead. It is essential for them to stay strong and to be equipped to respond quickly and effectively to the possibility that, at some point in the future, things will change significantly, and the current constraints may be lifted.

If you haven't already, read our Water Labour Report 2024 here and our Interim Water Report from January here.

We are also currently working on our Water Labour Report 2025 and need your input. You can fill out our survey here.