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| MS40153 |
| MSI WATER SUPPLY INDUSTRY CAPITAL EXPENDITURE: May 2003 |
| Overview |

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This report covers: water supply industry structure, England & Wales, Scotland, Northern Ireland, The Environment Agency, OFWAT, DWI, Capital Investment, by the Water Only Companies, Water and Sewerage Companies, by the Environment Agency, on Water projects by the UK Water Industry,
| 1 | KEY FINDINGS | 1 |
| 2 | INTRODUCTION | 3 |
| 2.1 | Definitions | 3 |
| 2.2 | Methodology | 8 |
| 2.3 | Economy | 8 |
| 2.3.1 | Overview | 8 |
| 2.3.2 | Interest Rates | 11 |
| 2.3.3 | Inflation | 12 |
| 2.3.4 | The Budget, March 2002 | 13 |
| 2.3.5 | Pre-Budget Report, November 2002 | 14 |
| 2.3.6 | Forecasts | 15 |
| 2.4 | Exchange Rates | 17 |
| 2.5 | Abbreviations | 17 |
| 3 | Water Supply Industry Structure | 20 |
| 3.1 | Overview | 20 |
| 3.2 | England And Wales | 21 |
| 3.3 | Scotland | 23 |
| 3.4 | Northern Ireland | 23 |
| 4 | Regulatory Structure | 24 |
| 4.1 | Regulatory Background | 24 |
| 4.2 | England And Wales | 25 |
| 4.2.1.1 | Introduction | 25 |
| 4.2.1.2 | The Environment Agency | 25 |
| 4.2.1.3 | OFWAT | 25 |
| 4.2.1.4 | DWI | 27 |
| 4.2.2 | Scotland | 27 |
| 4.2.3 | Northern Ireland | 28 |
| 5 | CAPITAL INVESTMENT: UK Overview | 30 |
| 6 | Capital Investment In England And Wales | 32 |
| 6.1 | Capital Investment, 1998-2002 | 32 |
| 6.1.1 | Overview | 32 |
| 6.1.1.1 | Capital Investment By The Water And Sewerage Companies | 34 |
| 6.1.1.2 | Capital Investment By The Water Only Companies | 41 |
| 6.1.1.3 | Capital Investment By The Environment Agency | 50 |
| 6.1.2 | Factors Affecting Investment | 52 |
| 6.1.2.1 | Overview | 52 |
| 6.1.2.2 | Legislation | 52 |
| 6.1.2.3 | Sources Of Finance | 54 |
| 6.1.2.4 | Regional Characteristics | 59 |
| 6.1.2.5 | Other | 60 |
| 6.1.3 | Forecast Capital Investment, 2003-2007 | 60 |
| 6.1.3.1 | Overview | 60 |
| 6.1.3.2 | Forecast Capital Investment By The Water And Sewerage Companies | 62 |
| 6.1.3.3 | Forecast Capital Investment By The Water Only Companies | 63 |
| 6.1.3.4 | Forecast Capital Investment By The Environment Agency | 65 |
| 7 | Capital Investment In Scotland | 67 |
| 7.1 | Overview | 67 |
| 7.2 | Capital Investment, 1998-2002 | 67 |
| 7.3 | Factors Affecting Investment | 68 |
| 7.4 | Forecast Capital Investment, 2003-2007 | 68 |
| 8 | Capital Investment In Northern Ireland | 70 |
| 8.1 | Overview | 70 |
| 8.2 | Capital Investment, 1998-2002 | 71 |
| 8.3 | Factors Affecting Investment | 73 |
| 8.4 | Forecast Capital Investment, 2003-2007 | 74 |
| 9 | MAGAZINES | 75 |
| 10 | Trade AssociationS | 77 |
| 11 | Regulatory Organisations | 78 |
| List of Tables | |
| 1. UK Retail Price Indices, 1997-2002 | 4 |
| 2. UK Economic Indicators, 2000-2004 | 11 |
| 3. Areas Of Diversification For Selected WaSCs And WoCs | 22 |
| 4. Total Capital Investment On Water Projects By The UK Water Industry, By Region, 1998-2002 | 30 |
| 5. Total Capital Investment On Water Projects By The Water Industry In England And Wales, 1998-2002 | 32 |
| 6. Total Capital Investment On Water Projects By The Water Industry In England And Wales, By Type Of Company, 1998-2002 | 33 |
| 7. Proportional Importance Of Total Capital Investment On Water Projects In England And Wales, By Type Of Company, 1998-2002 | 34 |
| 8. Total Capital Investment On Water Projects By Water And Sewerage Companies In England And Wales, 1998-2002 | 34 |
| 9. Capital Investment On Water Projects By Water And Sewerage Companies In England And Wales, By Type Of Expenditure, 1998-2002 | 35 |
| 10. Capital Investment On Water Projects By Water And Sewerage Companies In England And Wales, By Company, 1998-2002 | 36 |
| 11. Capital Investment On Water Projects By Water And Sewerage Companies, By Company And By Type Of Investment, 2002 | 37 |
| 12. Proportional Importance Of Capital Investment On Water Projects By Water And Sewerage Companies, By Company And By Type Of Investment, 2002 | 38 |
| 13. Water And Sewerage Company Water Projects, By Company And By Type Of Project, 2002 | 39 |
| 14. Capital Investment On Water Projects By Water And Sewerage Companies, By Company And By Type Of Service, 2002 | 41 |
| 15. Total Capital Investment On Water Projects By Water Only Companies In England And Wales, 1998-2002 | 42 |
| 16. Capital Investment On Water Projects By Water Only Companies In England And Wales, By Type Of Expenditure, 1998-2002 | 42 |
| 17. Total Capital Investment On Water Projects By Water Only Companies In England And Wales, By Company, 1998-2002 | 43 |
| 18. Capital Investment On Water Projects By Water Only Companies, By Company And By Type Of Investment, 2002 | 44 |
| 19. Proportional Importance Of Capital Investment On Water Projects By Water Only Companies, By Company And By Type Of Investment, 2002 | 46 |
| 20. Water Only Companies Water Projects, By Company And By Type Of Projects, 2002 | 48 |
| 21. Capital Investment On Water Projects By Water Only Companies, By Company And By Type Of Service, 2002 | 50 |
| 22. Total Capital Investment By The Environment Agency, 1998-2002 | 52 |
| 23. Forecast Average Annual Price Rise Limits Of Water And Sewerage Companies, By Company, 2001-2005 | 55 |
| 24. Forecast Average Annual Price Rise Limits Of Water Only Companies, By Company, 2001-2005 | 56 |
| 25. Average Household Water Bills For Wascs, 2001/02 And 2002/03 | 57 |
| 26. Average Household Water Bills For WoCs, 2001-2003 | 58 |
| 27. Forecast Total Capital Investment On Water Projects By The Water Industry In England And Wales, 2003-2007 | 61 |
| 28. Forecast Total Capital Investment On Water Projects By The Water Industry In England And Wales, By Type Of Company, 2003-2007 | 61 |
| 29. Forecast Total Capital Investment On Water Projects By Water And Sewerage Companies In England And Wales, 2003-2007 | 62 |
| 30. Forecast Total Capital Investment On Water Projects By Water And Sewerage Companies In England And Wales, By Company, 2003-2007 | 63 |
| 31. Forecast Total Capital Investment On Water Projects By Water Only Companies In England And Wales, 2003-2007 | 64 |
| 32. Forecast Total Capital Investment On Water Projects By Water Only Companies In England And Wales, By Company, 2003-2007 | 65 |
| 33. Forecast Total Capital Investment By The Environment Agency, 2003-2007 | 66 |
| 34. Capital Investment On Water Projects By The Scottish Water Industry, 1998-2002 | 67 |
| 35. Forecast Capital Investment On Water Projects By The Scottish Water Industry, 2003-2007 | 69 |
| 36. Capital Investment On Water Projects By The Northern Ireland Water Industry, 1998-2002 | 72 |
| 37. Capital Investment On Water Projects By The Northern Ireland Water Industry, By Type Of Project, 2002 | 72 |
| 38. Forecast Capital Investment On Water Projects By The Northern Ireland Water Industry, 2003-2007 | 74 |
| List of Diagrams | |
| 1. Total Capital Investment On Water Supply Projects By The UK Water Industry, 1998-2007 | 2 |
| 2. Water And Sewerage Operators In Great Britain, 2003 | 6 |
| 3. Water Supply Only Operators In England And Wales | 7 |
| 4. Proportional Importance Of Revenue For The Environment Agency, 2002 | 51 |
| 1 KEY FINDINGS |
| Capital expenditure on water supply projects in England and Wales rose by 18 percent in 2002 to reach some £1.57 billion (2.50 billion). However, this increase in investment only partly reversed a three-year decline in investment which has taken place since 1998. |
| The main factors affecting investment by the water industry are legislation, sources of finance and regional characteristics. However, there are a number of additional factors influencing investment such as meeting customer requirements, improving customer services, metering, pricing, concerns over climate change and increases in demand as a result of population increases |
| In the year to March 2002 capital investment on water supply by the Scottish water industry increased marginally to £195.3 million (310.5 million). However, this level of expenditure in 2002 is some 58 percent higher than expenditure at the start of the review period in 1998. The increase in capital investment during this period reflects the commitment of the Water Service to meeting standards set by national and European directives |
| In the year to March 2002 capital investment on water supply by the water industry in Northern Ireland declined by 10 percent to £56.0 million (89.0 million). However the investment by the water industry in Northern Ireland in 2002 is still much higher than in the earlier years of the review period, a reflection on the commitment of the Water Service to meet standards set by national and European directives. |
| The following diagram illustrates the recent and forecast total capital investment on water supply projects by the UK water industry. |
Text © 2003MSI
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Last updated by Amanda Porteous June 2003