There are signs that business in the water sector is slowly starting to pick up. AMP5 started, of course, in April this year and most water companies have concluded their new framework agreements. There are still problems with a few water companies where procurement problems mean that contracts have still not been finalized.
As yet visibility on forward work is very limited. This means its very difficult for major contractors and suppliers to plan and consequently impossible to deliver the efficiency savings that the water companies are seeking.
This last year has been probably the most difficult ever in the water sector. It has been in effect a “double dip” with for the first time the periodic review process in England and Scotland coinciding. Secondly unlike other sectors such as Highways there has been no Government Fiscal stimulus. The result has been that many major suppliers have had to reduce staff by typically 25%.
Although many water companies maintain that they have managed to smooth out workloads suppliers are seeing a very different picture. The situation seems to be particularly severe with the highly geared water companies who have had to curtail expenditure as obtaining funding became more difficult. The true position will emerge once the June returns are published.
While there is no doubt workloads will increase as AMP5 progresses there has to be a serious concern that those laid off will have been lost to the water sector for ever and as a consequence the staff shortages evident a few years ago will return. With some suppliers withdrawing from the water sector there is a real risk that water companies will see costs increasing significantly as suppliers struggle to cope with the fluctuations in demand.
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