Last week saw a new tax year begin and a lot of changes for UK businesses to get used to. One of the changes that’s been in the works for a while is water deregulation.
While it might not have made the headlines over changes to minimum wage, apprenticeships and tax, it’s still going to be having an effect on British businesses.
Water deregulation means that now 1.2 million businesses will be able to choose their water supplier. This has been championed as an opportunity for SMEs to have more choice and make savings but is it that simple?
Learning from the Scottish market
While businesses will have more freedom on which supplier to choose based on value and customer service, the average savings are predicted to be as low as £80.
This shows potential trouble in the future, similar to when Scotland deregulated their water market with similar low margins.
Brendan Flattery, CEO of Utilitywise says: “The Scottish Water market deregulated in 2008 with similar low margins. The regulator then had to intervene after three years, widening the retail margin to allow savings of more than 20 per cent for all businesses. Since the intervention, around 50 per cent of businesses have switched.
“Disappointingly for small business owners, Ofwat has decided not to apply the lessons learned in Scotland which would result in a more vibrant market from day one of deregulation in England.”
Flattery has highlighted that SMEs are currently under a lot of pressure. Rising business rates, energy costs and wages, the apprenticeship levy along with the decreased value of the pound and the uncertainty that Brexit poses mean that they need more help from the government.
Flattery said: “UK SMEs provide the backbone to our economy but are being hit by a combination of rising energy costs, increased business rates and burdensome regulation as well as an uncertain post-‘Brexit’ future.
“The government must not overlook the pressure that is being brought to bear on UK SMEs.”
Flattery has called on the government to look at water deregulation and ensure that it works for SMEs. “Water deregulation which came into force in England this weekend is a welcome step but SMEs are set to miss out almost completely. SMEs will be able to save an average of only £80 by switching water supplier post deregulation meaning that there is next to no price-saving incentive to switch.
“This is a missed opportunity by the government to introduce real competition into a new utility market and provide material cost-saving benefits to around 1.2 million businesses.”