Will Brexit Impact The Water Industry In The UK?
Added: (Wed Nov 29 2017)
Pressbox (Press Release) -
Since England voted to leave the European Union (EU), there has been many debates on how Brexit will affect the financial stability of the country, however, another question to be answered is the impact taking place on the water industry in the UK.
According to chief executive of British Water, separation from the EU will have a major impact on the water sector, as there are noteworthy investments from European directives on water, wastewater and the environment in the UK sector.
Effects of Brexit on the UK water sector:
• Water companies having low-risk assets compared to other sectors potentially might be less affected in the economy when it comes to cost of debt and cost of equity.
• Due to slower growth in the UK economy, the growth of customer base and wholesale revenues for water companies can produce lower levels than anticipated.
• On the other hand, wholesale revenues may be higher in nominal terms (when no inflation is considered), however higher bills in these non-inflation conditions may aggravate unmanageable debt and negatively influence customer’s willingness to pay for a service.
• If immigration is restricted in the Brexit movement and higher consumption of energy is needed, water companies could experience an increase in overall costs in their businesses.
• Since the EU drives a sizeable proportion of the environmental policies enforced by legislation, water companies in the UK may experience a decline in future investment in the water environment due to the uncertainty of future leadership and control systems in the sector.
• Another concern is the availability of finance for the UK water sector, as one of the main financial providers is the European Investment Bank.
• The effect of Brexit on the supply chain and access to skilled labour brings great concerns to companies who outsource employees and import products from foreign markets.
Despite all the controversy, British Water has proclaimed to have the knowledge and expertise to assist businesses in the UK with navigating this new political turmoil and economic uncertainty in public and private sectors. They are encouraging companies to view Brexit in a positive light, and an opportunity to develop new environmental legislation and projects.
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