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Does the water industry need a total revamp?

Severn Trent, one of the UK's more prominent water companies, has today suggested that a radical reform of the UK water industry is needed in the short term. The company believes that after 20 years of privatisation the industry is still too fragmented and there is a need to reduce the number of water companies in the UK from the current number of 22. But what are the consequences for UK consumers?

The immediate consequences for UK consumers are a forecast 27% increase in household water bills over the next 20 years before inflation. When you also take into account the fact that water bills have increased by 45% in real terms since 1990 it is easy to see why there are fears for the short, medium and longer term. So why has the sector not consolidated and why are there still so many UK water companies?

It seems as though a mixture of regulatory restraints and high company debt have held back what many expected to be a serious bout of consolidation over the last few years. If Severn Trent is correct in its forecast for the future there needs to be change, both in the regulatory markets and the water markets themselves. But who would be brave enough to instigate what would be perhaps the most controversial and the largest ever reorganisation of the UK water industry?

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