Business Stream steals a march on rivals with pre-privatisation deals

Published on Thursday 17 February 2011 13:20

SCOTTISH Water's commercial offshoot has secured advisory deals with Marks & Spencer and the Co-operative south of the Border as it seeks to build its brand ahead of full privatisation of the English water market.

Business Stream chief executive Mark Powles hopes the seven-figure advisory work will allow the subsidiary to steal a march on future rivals as the coalition government prepares to publish a white paper this summer on radical changes to the way water is sold and supplied to companies in England.

Scotland's water market was opened up to competition in April 2008 but Business Stream, whose job it was to prevent newcomers from poaching any of its 100,000 ready-made business customers, is also hoping to conquer the English market if the government rubber-stamps liberalisation there.

It secured a licence to operate south of the Border 18 months ago but is currently restricted to offering advisory work, helping companies to reduce their water consumption and meet environmental targets.

Powles hopes that Business Stream, which is described as "a Scottish Water company", will ultimately be able to sell full water and waste management services to English firms.

"We are working with a couple of multi-site retailers down south where we are providing water efficiency services across their branch networks," Powles said. "We have about four live clients now (in England]. We want to continue that work and progressively grow our business and presence south of the Border.

"It's one thing standing on the roof tops and saying: 'Competition is good'. We are very aware that we need to demonstrate that through the things we do. Winning business, delivering success south of the Border adds to that weight of argument that competition is good for customers."

Powles said a number of customers in Scotland, which also have offices or shops in England, have told him they would be keen to buy Business Stream's services if the English market is opened up to greater competition.

"If you are a multi-site retailer, you don't want one model south of the Border and another up here as that just creates complexity," he said.

The Department for Environment, Food and Rural Affairs (Defra) is due to publish a strategy for the English market by the summer but Powles said the slow progress was "frustrating".

A very small portion of the market south of the Border was privatised 20 years ago but this only applies to the 2,000 largest users of water with a single site and it doesn't include waste management.

"The margins available to retailers (on this kind of work] are between 0.5 per cent and 1 per cent," Powles said. "Any business needs to be able to make a margin to invest in services and to demonstrate savings so, yes, we are frustrated."

Since the commercial Scottish market was opened up three years ago, Business Stream has had to bat off criticism that privatisation has failed north of the Border.

A survey by the Federation of Small Businesses (FSB) last summer found fewer than half of its members realised they could switch water suppliers and only 3 per cent had actually done so. However, business groups such as the FSB and the Institute of Directors concede that the problems have less to do with Business Stream, and more to do with other providers not shouting enough about their services.

Business Stream still lays claim to the lion's share of the market.

Despite this, Powles insisted competition from the four other licence holders - Satec, Aimera, Wessex Water and Osprey - was getting tougher and customers have benefited from privatisation.

He said a third of businesses have put their water contracts out to competitive tender over the last three years while 40 per cent of customers are now on a better financial deal.

"The competition is learning about us and these firms are developing their own proposition around that we have got to be one step ahead," Powles said.