Blog

Brexit’s Impact on the Water Industry

On June 24th 2016, Britain woke up to find the result of one of the biggest political shake-ups of recent times. Britain’s majority decided to leave the European Union with 51.9% of voters (17.4m) voting to leave, against the 48.1% (16.1m) who voted to remain. (It turned out to be one of two political shake-ups in 2016 after Donald Trump was elected as President of the USA some months later). This decision will undoubtedly, and in many respects already has, create a new political, economic and trading landscape which almost every sector is going to feel, albeit no one really seems to know when or to what extent.

I personally specialise in the placement of experienced professionals in the water & chemical industries, so this post covers my thoughts on the situation, 6 months on, after speaking with candidates, clients and industry leaders inside and outside the UK since the vote.

So what’s happened?

Not a lot. It’s fair to say that within commodity markets, and particularly the Water industry, there will be no fundamental change to the environment that the UK’s Water companies operate in. They will still be providing clean water, disposing and recycling wastewater and offering the same service that they did prior to June 23rd. I think it’s also fair to say that there will still be a net push towards countering the long-term challenges of climate change and other environmental issues. However, with the decision to leave the EU, comes concern around funding for infrastructure, investment in research and how leaving the European Union would affect environmental regulation. (These concerns will obviously be mirrored in other sectors too, not just the Water industry).

The future of funding from the European Investment Bank, which has signed off around £5.5 billion of finance contracts to the UK water sector [1] over the past 5 years or so, is at risk and as a net importer of energy the fall in the pound has already had a direct impact on costs.

There are several pieces of legislation that have been put in place by the EU that directly impact the UK’s water industry, whose future may now be uncertain. Two worth noting are the Water Framework Directive (WFD) which was introduced on 23rd December 2000 with the intention of cleaning up Europe’s ground and surface waters (rivers, lakes, groundwater and coasts). The overall goal of the WFD was/is to transform Europe’s water institutions and planning processes to ensure no further deterioration of water quality. The EU’s waters were, thereafter, regularly tested on their Biological, Hydromorphological, Physical-Chemical and Chemical qualities. At the time, the directive was a milestone and a step forward in achieving an ecosystem-based approach for water policy and water resource management.

Another piece of legislation that was introduced by the European Union was the Bathing Water Directive (BWD) which was introduced to monitor and regulate any body of Water that is not subject to (pre) treatment [2]. The BWD forced the UK to better regulate how sewage was treated and disposed which, up until the mid-80s, was openly pumped into the surrounding seas. The introduction of the BWD introduced tighter wastewater regulation which then made the UK’s beaches more appealing and, in turn, made the seaside towns more attractive and boosted these local economies [3]. Overall, good thing!

It is safe to say that the European Union, thus far, has had a hugely positive impact on implementing legislation to combat climate change and environmental issues. On top of the tidying up of the UK’s seas, there has been a drop of more than 35% in “acid rain” affected areas over the last 30 years and there has been a global switch to unleaded fuels [4], the latter obviously wasn’t a direct influence of just the European Union. The EU has implemented several policies, including the two above, that are now legally binding to its members. Depending on the terms that Theresa May negotiates with Brussels, on behalf of Britain’s exit, will depend on the extent that this decision will have on the UK’s Water industry. If, as part of our withdrawal, we remain part of the EU’s single market, we may still be bound by EU policies but with very little input into their direction, scope and future policies. If we are to have a complete withdrawal from the European Union, we will no longer be bound by these policies which have long been a driver in efficiency and we run the risk of slowing, or side-lining entirely, these efficiency improvements. A complete withdrawal from the EU, and their policies would allow the UK to remove itself from the bureaucracy of the EU and perhaps give the UK the opportunity to pass our own laws quicker than what is being achieved at the moment.  

One point worth noting, with Water pollution and Air pollution, which are recognised as important environmental challenges, and the impacts of both have been widely studied over the past three decades. Both forms are commonly understood to be trans-boundary in nature, whereby a pollutant from one area/country can quite easily transfer to, and have a detrimental impact, in another area/country. There are several examples that highlight the extent that a pollutant can travel, one of the more prominent of which was in 2010, with the volcanic eruption of Eyjafjallajökull in Iceland. This eruption grounded flights across Europe for days because the ash cloud had rapidly spread across thousands of miles. This is an extreme case but it highlights how quickly things move!

To take it back to Brexit, when it comes to air and water pollution in the UK, whether we are part of the EU or not – that will still be our problem to solve. The difference comes with the legislation and regulations that look to combat this issue. If we impose our own rules on this topic, however stringent they may be, there is no guarantee that a new (or current) government won’t change their mind about them. As we may well see across the pond, after the inauguration of a certain Mr Trump, the US could well change their mind about being a member of the Paris agreement on climate change.

Environmentally then, the existence of the EU at least means that 28 (27 soon?) countries agree to these environmental directives, and are unable to (easily at least) opt out if a new political party comes into force in one of those nations. Negotiations on global environmental challenges have been far more effective as a bloc of collective commitment, rather than standalone nations.

Therefore, whilst the fundamentals of the water market in the UK probably won’t be immediately affected in the UK, it will be interesting to see how (or if) the UK collaborates with the EU post-Brexit to tackle the environmental challenges we face at the moment.

If you're looking for a move, and have a background in Water or Chemicals, feel free to get in touch with me at lyle.king@charltonmorris.com for an introductory conversation. 

From the archive

To take your recruitment to the next level, simply talk to our specialists today