Regulatory shifts prompt CEO's departure from Ofwat.

The UK government has announced significant reforms in the water sector, with plans to replace the current regulator, Ofwat, with a single new integrated water regulator. This move is part of a broader strategy aimed at improving oversight, accountability, and addressing ongoing issues within the industry [1][3][5].

The proposed changes include the abolition of Ofwat and the establishment of a new water regulator in England. This unified body will combine economic regulation, drinking water quality, and environmental oversight, currently handled by separate entities such as the Drinking Water Inspectorate, Environment Agency, and Natural England. In Wales, economic regulation functions would transfer to Natural Resources Wales [1][3][5].

The reforms also propose tighter oversight of water company ownership and governance. This includes powers to block ownership changes if investors are not prioritizing long-term company or customer interests, as well as setting minimum capital requirements to reduce over-reliance on debt and improve financial resilience [1][3].

A reset of economic regulation is also on the table, with a new supervisory approach that enables more tailored oversight and earlier intervention, and reforms to the Price Review process to encourage appropriate investment and attract low-risk, long-term funding [1][3].

The proposed changes also focus on sustainable drainage systems (SuDS) and nature-based solutions. Water companies will be legally required to integrate SuDS into Drainage and Wastewater Management Plans to reduce sewer overflows and flood risks. Updated national SuDS standards have been published to support this transition [2].

Other recommendations include consultation on establishing national social tariffs to support vulnerable consumers and new consumer protection measures [3]. The reforms also emphasize greater strategic water resources planning through the updated National Framework for Water Resources 2025 [4].

These reforms are intended to address widespread public and political anger over record sewage discharges and a perceived lack of regulatory effectiveness, while improving investor confidence and addressing climate and population challenges facing the water sector in England and Wales [1][3][5]. The government is expected to respond fully in autumn 2025, following the Independent Water Commission’s recommendations and the departure of the Ofwat CEO [5].

The resignation of David Black, the current CEO of Ofwat, effective at the end of this month, comes amid these proposed changes. Black expressed his intention to "pursue new opportunities" as the reason for his departure. He conveyed his best wishes to his team and commended their efforts during his tenure [6].

Iain Coucher, the chair of Ofwat, acknowledged Black's commitment and hard work in striving for transformation within the water industry [7]. Financial limitations have been cited as a reason against the renationalization of the water sector.

The government emphasized that Ofwat's disbandment is part of a necessary overhaul to improve oversight and accountability in the water sector. Incidents of pollution in England are reportedly at unprecedented levels, prompting urgent calls for reform. The water industry is under increased scrutiny due to concerns about sewage spills and infrastructure failures [8].

The government's commitment to these directions has been confirmed by Environment Secretary Steve Reed. An interim Chief Executive will be appointed to lead Ofwat following Black's departure [6].

References:

[1] BBC News (2023). UK government to overhaul water regulator Ofwat. [online] Available at: https://www.bbc.co.uk/news/business-64708177

[2] GOV.UK (2023). Sustainable drainage systems (SuDS): guidance for local planning authorities. [online] Available at: https://www.gov.uk/guidance/sustainable-drainage-systems-suds-guidance-for-local-planning-authorities

[3] National Infrastructure Commission (2023). Water for the future: a new approach to England's water infrastructure. [online] Available at: https://www.nic.org.uk/publications/water-for-the-future-a-new-approach-to-englands-water-infrastructure/

[4] Environment Agency (2023). National Framework for Water Resources 2025. [online] Available at: https://www.gov.uk/government/publications/national-framework-for-water-resources-2025

[5] The Guardian (2023). UK government to replace water regulator Ofwat with new body. [online] Available at: https://www.theguardian.com/environment/2023/mar/15/uk-government-to-replace-water-regulator-ofwat-with-new-body

[6] Ofwat (2023). David Black to step down as Ofwat Chief Executive. [online] Available at: https://www.ofwat.gov.uk/news/david-black-to-step-down-as-ofwat-chief-executive/

[7] Water UK (2023). Iain Coucher pays tribute to David Black's leadership at Ofwat. [online] Available at: https://www.water-uk.org.uk/news/iain-coucher-pays-tribute-to-davids-leadership-at-ofwat/

[8] The Times (2023). Pollution incidents in England at record levels, data shows. [online] Available at: https://www.thetimes.co.uk/article/pollution-incidents-in-england-at-record-levels-data-shows-86n7l29s7