Traditional approaches are holding back the UK’s smart water delivery

By Simon Bryant, Finance & Commercial Director at Horizon Water Infrastructure

Summary

Smart water programmes aren’t being constrained by technology or ambition – they’re being constrained by how they’re contracted and funded. This article explains how Horizon Water Infrastructure approaches contracting and funding differently, why traditional models create delivery risk, limit flexibility and slow rollout, and how aligning funding, delivery and outcomes is becoming essential for AMP8 and beyond.

Smart water delivery is accelerating – but contracting and funding models haven’t kept up

The delivery of smart water meters and network monitoring programmes is accelerating across AMP8. Expectations are higher, timelines are tight, and Ofwat regulatory scrutiny is increasing – but while the technology has moved forward quickly, contracting and funding models haven’t kept up.

How water companies are contracting and financing water infrastructure is now one of the biggest factors determining programme delivery speed, risk, and long-term value. The issue isn’t just access to capital. It’s how that capital is structured, deployed and connected to delivery.

Under a traditional approach, water companies procure smart infrastructure as a series of separate components. Meters come from one provider. Communications from another. Installation is contracted separately. Software and data platforms are layered on top.

Each element is commercially distinct, often procured at different times and managed by different teams. On paper, this creates control. In practice, it creates complexity.

Water companies end up bearing the responsibility to ensure that:

Meters are delivered on time
Networks are ready when devices are installed
Systems integrate properly
Data flows reliably and to the required standard

This effectively turns the utility into an integrator – coordinating multiple suppliers, managing interfaces and carrying the risk if something goes wrong. At a small scale, that can work. At AMP8 scale – with hundreds of thousands or millions of assets – the risk builds quickly.

Delays in one part of the supply chain can ripple into others. Integration issues can slow down data availability. Performance problems can appear long after installation, when fixing them is far more costly and disruptive.

In this article, I want to explain why that creates unnecessary risk and inefficiency – and how Horizon Water Infrastructure structures asset financing around delivery and outcomes to reduce risk, unlock pace, and align investment with performance.

Talk to our team about integrated funding and delivery for water companies.

In AMP8, capital constraints are about timing, flexibility and risk – not just availability

It’s often assumed that the main challenge for water companies is access to capital. The reality is more complicated.

Water companies operate within fixed revenue settlements. They can’t easily flex pricing or significantly increase borrowing. Balance sheets are already highly geared, and investment decisions need to align with regulatory expectations and ODI commitments.

That creates three practical constraints:

Timing: Capital has to be deployed within fixed AMP windows, even when delivery needs change
Flexibility: Programmes need to adapt as complexity, scope or priorities evolve
Risk exposure: Underperformance can lead directly to financial penalties

As a result, even when funding is available in principle, it can’t always be used in the way the programme needs.

A rollout may need to accelerate, but capital phasing may not allow it. A programme may become more complex than expected, but additional funding can be difficult to secure mid-cycle. Investment in one area can limit flexibility elsewhere.

That’s why the real challenge isn’t just how much capital is available – it’s how well that capital supports delivery.

Smart water programmes only succeed when funding, delivery and performance are structured together

Smart water infrastructure isn’t a typical asset investment. It’s a system of interconnected technologies, suppliers, data flows and operational processes that need to perform consistently over 15–20 years. The value isn’t created at installation – it’s created over time through performance.

When funding, delivery and performance are treated as separate decisions, friction appears.

Procurement may focus on upfront unit cost rather than long-term value. Delivery may prioritise installation speed without fully aligning with data integration. Funding may only be considered after key decisions have already been made.

That disconnect can lead to:

Misaligned incentives between suppliers
Increased interface risk
Capital being committed before performance is proven
Delays in turning data into operational outcomes

Programmes work far better when these elements are designed together from the start. Funding can be aligned to outcomes rather than assets. Delivery models can be built around performance accountability. Risk can be placed with the parties best equipped to manage it.

The result isn’t just smoother delivery – it’s far greater confidence that the programme will actually deliver the outcomes it was designed for.

Outcome-based, funded delivery models transfer risk, increase flexibility and accelerate rollout

Horizon Water Infrastructure takes a different approach to conventional asset-led funding – integrating funding into the delivery model rather than treating it as a separate layer.

In a funded, outcome-based structure, infrastructure is delivered as a service rather than as a collection of assets. A single delivery partner takes responsibility for coordinating the supply chain, ensuring integration and delivering defined outcomes.

Most importantly, this changes how risk is allocated. Instead of sitting with the water company, key risks are transferred to the delivery partner, including:

Supply chain coordination and interface management
Technology performance over time
System integration and data flow
Elements of financial risk, such as inflation

Assets are owned and managed within the model, rather than sitting on the water company’s balance sheet. Costs can be spread over time, giving more flexibility across AMP cycles and reducing pressure on capital headroom. In addition, customer bill impacts are smoothed, and the traditional, ‘lumpy’ cyclical cycle of replacement investment is avoided.

This creates several advantages:

Programmes can move faster without being held back by upfront capital constraints
Funding can flex if complexity increases or scope changes
Supply chains can be adapted over time, rather than locked in at the start

Importantly, accountability becomes clearer. Performance is tied directly to outcomes – not just whether assets have been installed.

For water companies, this shifts the role from managing a complex web of suppliers to overseeing a single, accountable delivery structure focused on results.

Explore how Horizon Water Infrastructure can help you fund, deliver and de-risk your smart water programme

Smart water programmes will play a central role in how the sector meets its regulatory, environmental and customer commitments over the coming decades. The question is no longer whether to invest – it’s how to structure that investment so it delivers reliably, efficiently and at scale.

Traditional funding models were built for simpler, asset-led infrastructure. Smart, data-driven systems need a different approach.

When funding is treated as part of delivery – rather than separate from it – programmes can move faster, risk can be reduced and long-term value becomes much more certain.