Introduction

The upcoming AMP8, officially starting in 2025, is set to be one of the most challenging yet. With deliverability, affordability, and sustainability at the heart of the required changes, AMP8 represents a pivotal phase in a series of regulatory cycles for the England and Wales water industry. This period holds significant importance for water companies, regulators, and stakeholders, all crucial to its implementation and success.

Here is everything you need to know about AMP8: its objectives, key changes, and the strategic focus areas that will shape the future of the UK water industry.

AMP8 Definitions

Asset Management Period (AMP): usually a five-year regulatory cycle set by Ofwat that dictates the investment and performance targets for water companies in England and Wales. The AMPs are responsible for a structured approach to investment planning and regulation. 

Ofwat: the body responsible for economically regulating England and Wales's privatised water and sewerage industry. 

AMP8: Asset Management Period 8 refers to the eighth upcoming cycle of this regulatory framework, which runs from April 2025 to 2030. It sets out the financial and operational expectations for water companies across England and Wales.

Historical Context: Overview of Previous Asset Management Periods (AMPs)

Ofwat introduced the concept of Asset Management Periods in 1990 with the initiation of AMP1. This marked the beginning of a structured approach to improve water and wastewater services' planning, investment, and management.

Ofwat introduced the AMP cycles to create a systematic, transparent, and accountable framework for managing the water and wastewater services industry. This framework ensures the sustainable and efficient delivery of services to customers while meeting regulatory and environmental requirements.

Over the years, previous AMPs have progressively addressed various challenges within the water sector, ranging from infrastructure development to environmental sustainability. Each period builds on the lessons learnt from previous cycles, with the overarching goal of enhancing water companies' efficiency and service delivery.

What were the goals of AMP7?

According to the AMP7 ‘final determinations’ document released towards the end of 2019 (Ofwat, 2019), England and Wales water companies focused on tackling challenges influenced by population growth and climate change. Over the 2020-25 period, companies have overall committed to (Ofwat, 2022):

• Reducing pollution incidents by 30%
• Reducing leakage by 16% 
• Reducing internal sewer flooding incidents by 41% 

During this AMP cycle, water companies have undertaken major infrastructure upgrades, which have improved reliability and service delivery. However, the results are yet to be finalised as we finish off the AMP7 cycle.

The final phase of AMP7 is unfolding amid intense public and media scrutiny, particularly concerning the role of combined sewer overflows (CSOs) in discharging pollution into water bodies.

The state of today's water utility industry

In July 2024, The Environment Agency published its annual report on the environmental performance of England’s nine water and sewerage companies during 2023, stating,

“The report shows an improvement in star ratings under the Environmental Performance Assessment (EPA), but the majority of companies continue to underperform… ” 

• Severn Trent Water – 4 stars, the same as the previous year
• United Utilities – 4 stars, up from 3 stars
• Wessex Water – 4 stars, up from 2 stars
• Northumbrian Water – 3 stars, the same as the previous year
• Anglian Water – 2 stars, the same as the previous year
• Southern Water – 2 stars, the same as the previous year
• South West Water – 2 stars, the same as the previous year
• Thames Water – 2 stars, the same as the previous year
• Yorkshire Water –2 stars, down from 3 stars

The report also highlighted that the number of serious pollution incidents has increased from 44 in 2022 to 47 in 2023, remaining unacceptably high despite expectations to trend towards zero. Over 90% of these were caused by four companies (Anglian Water, Southern Water, Thames Water, and Yorkshire Water), resulting in a polarised performance picture across the sector.

Objectives and goals of AMP8

The AMP8 framework will succeed the current £51 billion AMP7 investments in the water sector starting on April 1, 2025, and continuing for five years, introducing new challenges and targets. 

AMP8 presents a significant opportunity for water professionals in the UK to secure funding for three main priorities:

• Digitalisation: Embrace complete digitalisation and data-driven operations.
• CSOs: Transition from reactive responses to CSO spills to proactive prevention.
• Nature-based solutions: Integrate Biodiversity Net Gain (BNG) and Sustainable Drainage Systems (SuDS) into routine operations.

Who will fund AMP8? 

Water companies will receive the £88 billion allocated by Ofwat (£8 billion less than what was asked for), which requires them to be stringent with their budgets and the plans they have committed to. 

The AMP8 framework will be funded by shareholders or through borrowing, with these costs recovered through customers’ bills over the next five years and beyond.

AMP8 Timeline and Important Dates

• AMP8 cycle: 1 April 2025 to March 2030. 
• October 2023: Water utilities submitted their plans to Ofwat for the next price review period from 2025-2030. 
• December 2024: The plans will be scrutinised and challenged by Ofwat before final decisions are made in December 2024. These determinations will outline the regulatory expectations and investment plans water companies must adhere to during the AMP8 period. (Ofwat, 2023)
• 1 April 2025: AMP8 officially begins.
• 2027: Interim performance reviews: Interim performance would likely occur around mid-2027, approximately two and a half years into the cycle. These reviews are essential for assessing progress, identifying any necessary adjustments, and ensuring that the set challenges and targets are on track to be met.
• 2030: Final assessments and reporting
  Following AMP8, Ofwat will release a final report on the success and failures of AMP8. 

Expected Focus Areas of AMP8

Environmental Sustainability Initiatives

AMP8 emphasises reducing carbon footprints, enhancing water efficiency, and promoting biodiversity. Water companies are expected to implement practices that reduce their environmental impact and contribute to long-term sustainability.

Customer Service Improvements

Initiatives to reduce service disruptions, improve response times, and increase overall customer satisfaction are central to AMP8. Water utilities must adopt new strategies to enhance their customer service performance.

Infrastructure Investment and Upgrades

Significant funding was allocated for maintaining and upgrading ageing infrastructure to ensure a reliable water supply and sewage treatment. Infrastructure investment is a key priority, aiming to address the long-term needs of the UK water industry.

Innovation and Technology in the Water Sector

Adopting cutting-edge technologies such as digital twins, predictive analytics, and IoT will improve operational efficiency. Innovation and technology in the water sector are essential for meeting AMP8's goals.

Challenges Facing the UK Water Industry in AMP8

The UK water industry faces the perfect storm of challenges in AMP8: 

• Climate change brings about more frequent and severe weather events, potentially straining water resources and infrastructure. 
• Ageing infrastructure requires significant investment and upgrades to maintain service reliability and quality. 
• The growing population increases demand for water supply and wastewater treatment services.

To meet these demands, the water industry must embrace innovation and leverage technological advancements and nature-based solutions to enhance efficiency and sustainability. 

Role of Innovation in Water for AMP8

The upcoming AMP8 period, beginning in April 2025, strongly emphasises innovation as a critical driver for achieving its ambitious goals in the water sector. By integrating cutting-edge technologies and innovative practices, water companies can enhance efficiency, sustainability, and customer service, ultimately leading to a more resilient and robust water management system.

Digital Twin Technology Potential

Digital twin technology is poised to play a pivotal role in the AMP8 framework by enhancing operational efficiency and enabling predictive maintenance. This technology allows water companies to visualise and plan water infrastructure, predict potential issues, and optimise operations​​. By utilising digital twins, companies can foresee and mitigate problems before they escalate, thereby reducing downtime and maintenance costs while ensuring a consistent supply of high-quality water to customers.
CTA: Learn how your teams can utilise digital twins to support AMP8 delivery 

Predictive Maintenance

Predictive maintenance, driven by advanced data analytics, is another cornerstone of innovation for AMP8. This approach involves using sensors and data collection tools to monitor the condition of water infrastructure continuously. By analysing this data, companies can predict when components will likely fail and take preemptive action to address these issues​ (Water Magazine)​. Predictive maintenance prevents costly repairs and service disruptions and extends the lifespan of infrastructure assets, promoting sustainability and cost-efficiency​.

Green Infrastructure and Nature-Based Solutions

Green infrastructure and nature-based solutions such as constructed wetlands, permeable pavements, and rain gardens will be increasingly adopted to address pollution and enhance environmental sustainability. These solutions help manage stormwater, reduce runoff, and improve water quality by mimicking natural processes.​ 

Net Zero and Its Influence on AMP8

AMP8 plays a crucial role in steering water utilities towards achieving net zero emissions, with a strong emphasis on sustainability and influencing long-term practices and goals. The UK water sector, responsible for about 1% of the nation's greenhouse gas emissions (Ofwat, 2022), is at the forefront of this transformation.

The UK water industry was one of the first sectors to set a target for zero net operational emissions by 2030, which is twenty years ahead of the broader economy's goals (Water UK, 2019). As the final regulatory period before 2030, AMP8’s actions are pivotal in shaping the industry's capacity to fulfill its sustainability commitments. This period is expected to drive innovation, enhance efficiency, and promote environmental stewardship across the sector, ensuring the UK water industry meets its ambitious targets.

Final Thoughts on the Importance of AMP8

AMP8 represents a transformative period for the UK water industry, focusing on achieving net zero emissions by 2030 and aligning with national climate goals. The actions taken during AMP8 will have long-lasting impacts on the industry’s ability to meet its sustainability commitments, driving innovation, efficiency, and environmental stewardship. By focusing on these principles, the UK water industry is poised to contribute significantly to national climate objectives while delivering reliable and sustainable water services​.

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