Reflections from Matt Hateley, Director for Asset Management and Operational Resilience
Asset management provides a framework and approach to oversee the lifecycle of infrastructure such as pipes and treatment works, from acquisition through to disposal. It ensures that these assets are utilised efficiently, maintained appropriately and aligned with long-term strategic objectives. In the context of water regulation, this is fundamental to delivering resilient services, safeguarding the environment and securing value for customers over time.
The consequences of poor asset management in the water sector may not be realised for several years; only becoming apparent when asset condition declines, reaches the end of its operational life and risks begin to escalate rapidly. We are starting to see some of the effects now, for example with increased pollution incidents partly due to lack of expenditure on combined sewer overflows over time.
We know that customers and the wider public are frustrated by these problems. That’s why over the summer we launched a consultation to embed asset management competency across all water companies in England and Wales via a new licence condition, and I am pleased to share our conclusions and next steps. Our approach reflects feedback from the sector, the changing regulatory landscape, and our commitment to delivering resilient, future-proofed water services.
Why asset management matters
We expect water companies to:
- Understand their assets (condition, criticality and performance)
- Understand the asset-related risks to service and the environment
- Develop and deliver mature, well justified business plans to fund maintenance and enhancement of their assets, and
- Deliver the right outcomes from short term serviceability to the long term (including the impact of climate change on assets).
A mature and robust Asset Management Framework supports this by setting out a strategic approach for companies to manage their assets and maximise their value. Linking this strategic outlook to tactical activities drives better understanding of assets, and a more holistic approach to decision making. Competency in this approach means companies can realise benefits such as:
- Improved decision-making, resulting in better services
- Better risk management
- Breaking down silos across organisations for improved efficiencies
- Improved customer satisfaction
Companies could demonstrate their integrated, strategic approaches through mature asset management, but without also being resilient to financial, environmental or governance pressures, wouldn’t be able to meet the expectations of their stakeholders in terms of performance. That’s why we’re working across Ofwat to help companies build overall resilience by improving how they manage their assets. It’s a key part of the bigger picture.
What we’ve done so far
Over summer, we consulted on policy to embed asset management competency in water companies. We received 24 responses from a diverse mix of stakeholders, including water companies, consultancies, consumer and environmental groups, and trade associations.
Our consultation set out proposals for a new asset management maturity licence condition, initially suggesting mandatory ISO 55001:2024 certification for all water companies. We listened carefully to industry responses, recognising the need for flexibility and proportionality. As a result, while ISO 55001:2024 remains good practice and companies will still be able to use it to comply with the new licence condition, companies will now be required to demonstrate the competency of their asset management systems in a way that aligns to their organisational context. This includes being able to demonstrate that competency through means other than holding the ISO certification. Scrutiny by an independent, appropriately qualified practitioner will be necessary where ISO accreditation is not pursued.
What’s next
Our immediate priorities are to formally consult on the new licence condition and supporting guidance, as required under the Water Industry Act. We‘ll engage closely with stakeholders to define minimum standards, boundaries, and reporting arrangements required so that the licence condition is fit for purpose and delivers improved maturity in the sector.
In 2026, we’ll be delivering the next edition of the Asset Management Maturity Assessment. This will examine the sector’s collective maturity, understanding where there are opportunities to improve, and likewise where there are innovative or leading practices to share. Where the licence condition is a rule all companies must adhere to, the AMMA is an opportunity for companies to learn from one another, increasing collaboration and encouraging further strides towards excellence.
Following the Independent Water Commission’s (IWC) recent report on the water sector, we expect Defra and the Welsh Government to publish updated strategic priorities for Ofwat this year. These priorities will help guide our transition as we prepare for the establishment of a new water regulator.
The IWC report emphasised the need for the new regulator to take a stronger role in overseeing infrastructure resilience and asset health (Recommendation 68), and to adopt a more supervisory approach (Recommendation 18). We believe the new licence condition will help deliver on these recommendations.
Working together for long-term resilience
Our conclusions mark a significant step towards more resilient, transparent, and mature asset management in the water sector. By balancing regulatory rigour with flexibility, and fostering a culture of continuous improvement, we aim to hold companies to account in delivering services for customers and society.
We’ll continue to work collaboratively with the sector, refining our approach, responding to feedback, and ensuring that our regulatory framework supports long-term resilience. You can get in touch with us directly at [email protected]
We are confident that focusing on this issue, and appropriate investment in understanding and improving asset management, will in time contribute to the improvements in service and performance that customers expect.