How to mitigate the impact of water price increases on your business

Against a backdrop of significant price increases for water, which will kick in in April 2025 , businesses need to be proactive in managing their water costs.

Acting now can help to mitigate the negative effects of water price increases while promoting more efficient and environmentally conscious practices.

Get away from ineffective retail procurement

The easiest approach is optimising water supply contracts by running competitive tenders or considering switching suppliers. This allows you to secure better rates by negotiating terms. However, it has little meaningful impact, as retail margin is a very small percentage of overall water spend, and wholesale prices are fixed. It also positions water as if it were a basic commodity, rather than a business essential resource, which leans a business towards a supplier that is cheap, rather than one that adds value.

Positives: Easy, common, quick

Negatives: Ineffective – minimal impact on total water spend?

Take control

For large organisations, a superior procurement option than the standard retail model is self-supply, which involves acquiring a license to bypass the retailer and purchase directly from wholesalers. A company operating a self-supply license has a ‘managing agent’ fulfilling retail functions on its behalf. At the point of contract, the fee paid to a self-supply managing agent is of an equivalent cost to retail tariffs, but self-supply delivers better performance, thus reducing total annual spend on water.*

Positives: Best performing approach to water procurement in England; cheapest price long-term

Negatives: License acquisition time

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Engage in 'active water management'

Nonetheless, regardless of the approach a business takes to the water market, focusing solely on procurement simply isn't enough. To truly control and manage water costs, businesses need to implement strategies to reduce their overall consumption.

1. On-Site Improvements: Water efficiency measures, such as site audits and leak detection, can identify areas where water is wasted, allowing companies to fix inefficiencies. Physical upgrades to more efficient fixtures or equipment can further reduce usage, leading to long-term savings.
2. Data Management and Insight: In addition to physical interventions, better data visibility is key to taking control and achieving smarter water management. Advanced metering infrastructure (AMI) provides real-time data on water consumption, giving businesses insights into usage patterns. With this technology, organisations can not only fix leaks quicker, but also monitor and adjust their consumption more effectively, ensuring they only use what is necessary.?

Positives: Increased efficiency = better financial and environmental outcomes; better visibility of water (more data and metrics for stakeholder reporting)

Negatives: Capex required; return on investment can be slow, as water is relatively cheap

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Waterscan:

As the UK’s leading water management consultancy, we help the country’s largest businesses to combine smarter procurement practices with initiatives to reduce water consumption - minimising the impacts of rising water costs. We focus on delivering fantastic financial and environmental outcomes to our customers, improving control over operational expenses and supporting sustainability efforts, which are increasingly critical in today's business environment.

If you want to talk about your organisation's approach to water, connect with me on LinkedIn, or email me at [email protected]

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*The improved performance of self-supply comes as a result of the license holder paying for water directly, rather than via a retailer acting as an administrative intermediary. Therefore, 100% of the money spent on a managing agent goes towards the service being provided. Contrastingly, in the retail model, retailers usually have to pay wholesalers before collecting payments from their customers, meaning a significant portion of what a company spends on a retailer actually goes towards interest charges (cost of capital). The end result is that self-suppliers receive a better quality service for an equivalent cost.

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