What is AMP8 and How Will it Affect UK Businesses?

Water companies have been in the spotlight recently, with talk of large price increases, financial difficulties, and questions about ownership. In the middle of this land is AMP8, the next period of industry regulation. This will cover a critical five-year period for water companies as we all get to grips with the realities of climate change. So, what is AMP8, and what will the effect be for your business? 

What is AMP8?

Ofwat regulates water in the UK and manages the industry through five-year-long ‘Asset Management Plans’ (AMPs), which cover a water management company’s short—and long-term objectives over that period. These AMPs aim to increase efficiency and service levels within the industry, and meeting or missing their goals carries both financial rewards and penalties for performance (or underperformance) in delivering good customer engagement, affordable bills, resiliency in the water network, and innovation. 

Timeline: When Does AMP8 Start?

The next period, AMP8, replaces the £51.7bn AMP7 on the 1st of April 2025 and will run until the 30th of March 2030. That end date hangs very heavy in the air. With AMP7 in 2020, water companies committed to achieving net zero by 2030. AMP8 only turns the heat up under the need to accomplish this, which has been reflected in a doubling of the investment to be put into the industry over the coming five-year period. 

AMP8 Framework and Structure

Water companies outlined £96bn infrastructure plans for the next five-year investment period in October 2023. Ofwat is expected to deliver its verdict on whether they can progress by the end of this year. Many suppliers have already started tendering out for partnerships for future changes. The framework that results from this will determine where this money is invested over the five years from April 2025. 

With pressure growing over rising bills, leaks, and other forms of pollution, the water industry is under scrutiny like never before. Where companies fail to meet their obligations, they have significant enforcement powers under the Water Industry Act 1991. We can obtain legally binding undertakings and impose enforcement orders to secure compliance and change behaviour. For the most serious contraventions, they can impose large financial penalties.

Impact on the Water Industry

The focus on net zero is just one of the aspects of this new regulatory period which will impact the water industry. Some of the anticipated impacts include: 

Environmental Focus and Stringent Targets

AMP8 prioritises environmental sustainability and resilience, while water companies must address climate change, reduce carbon emissions, and enhance river quality monitoring. Stringent targets set by the Department for Environment, Food & Rural Affairs (DEFRA) require CSOs (combined sewer overflows) near bathing waters to meet new standards by 2030, followed by high-priority sites like Sites of Special Scientific Interest (SSSIs) by 2045.

Investment Priorities

Pollution control is a key investment area, and optimising programmes to deliver environmental benefits while balancing customer bills is crucial. Investments extending beyond CSOs must address broader pollution issues, such as asset failures and hydraulic overloads.

BATNEEC Approach

The water industry can explore the Best Available Technology Not Exceeding Excessive Cost (BATNEEC) approach to prevent increased costs from affecting customer bills. Surface water separation and sustainable drainage systems (SuDS) limit CSO impact, while regular updates to BATNEEC assessments may better reflect evolving economic landscapes and technological advancements.

Holistic Pollution Reduction Strategy

While CSOs receive significant attention, they represent only part of the pollution issue. A holistic approach addresses the root causes of failures and focuses on detection, response, and recovery speed to limit environmental impacts.

How AMP8 Will Affect UK Businesses

This new investment period won’t solely affect water companies; it will also have knock-on effects throughout the British industry. Some of the key ways include:

Increased Investment and Opportunities

AMP8 allocates a record £96 billion for infrastructure and monitoring—nearly double the previous cycle. Businesses involved in water infrastructure, technology, and services will see increased opportunities for contracts and partnerships.

Environmental Focus and Compliance

AMP8 prioritises environmental sustainability, climate change resilience, and pollution reduction. Businesses must align with stringent environmental targets, invest in green technologies, and reduce their carbon footprint.

Supply Chain Collaboration and Risk Management

Water companies will collaborate closely with their supply chain partners. Businesses in the supply chain can contribute expertise and innovation, and more evenly distributing development and innovation risks will keep subcontractors engaged.

Challenges and Risks

Balancing infrastructure investments with affordability for consumers is critical. Rising costs could impact public satisfaction and lead to backlash, but ensuring compliance with evolving regulations is essential to avoid penalties and reputational damage.

Innovation and Adaptation

Businesses should embrace innovation, especially in pollution control and wastewater treatment areas. Adapting to changing priorities and technological advancements will be crucial.

Preparation and Compliance Strategies

There are steps that all businesses can take to prepare for the coming changes:

Invest in Employee Training and Development

Water companies should prioritise training programs for their workforce. Consider role-relevant training, such as the Level 4 Asset Manager Apprenticeship Standard. This ensures that employees understand AMP8 requirements and can contribute effectively to asset management strategies.

Embrace Data-Driven Decision-Making

Utilise data analytics and technology to inform asset management decisions. Monitor asset performance trends, predict failures, and optimise maintenance schedules. Data-driven insights enhance efficiency and reduce costs.

Prioritise Risk Assessment and Mitigation

Assess risks associated with asset failure. Prioritise high-risk assets for maintenance, replacement, or upgrades. Proactive risk management minimises disruptions and environmental impact.

Consider the Entire Asset Lifecycle

Plan for assets from design and construction to operation and eventual decommissioning. Lifecycle planning ensures long-term sustainability and cost-effectiveness.

Stay Compliant with Regulatory Requirements

Adhere to Ofwat’s regulations and reporting standards. Compliance ensures transparency, accountability, and alignment with industry goals. 

The targets are stiff, and the pressure is high, but the changes coming with AMP8 represent an opportunity for businesses across the UK. Almost £100bn will be invested into the industry between 2025 and 2030, but with that amount of money being spent, the expected results must be achieved. The water industry faces an increasingly delicate balancing act of priorities, expected to keep bills affordable while significantly investing in extremely important projects at a time when global geo-political pressures are still pushing up prices across the board. With a new government having just been elected and public unhappiness over water companies still growing, the water pressure couldn’t be getting much higher.