UK Waters: AMP8 delivering - growth up, fundamentals strong

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UK Waters: AMP8 delivering - growth up, fundamentals strong

16 July 2026

European Utilities & Clean Energy

The UK water sector is entering a structurally stronger growth phase under AMP8, driven Bartlomiej Kubicki

+49 69 717 4418 by a step-change in investment, supportive inflation and the emergence of reopeners as

bartlomiej.kubicki@bernsteinsg.com an important source of incremental capital deployment. Our analysis points to three key

themes: stronger-than-expected RCV growth, structurally higher but manageable cost

Specialist Sales inflation associated with the investment cycle, and increasing differentiation in operational

Gareth Williams delivery. While the sector backdrop remains attractive, stock-specific execution is becoming

+44 20 7762 5256 increasingly important. We maintain Outperform ratings on Severn Trent and United

gareth.b.williams@bernsteinsg.com Utilities, while reiterating Market-Perform on Pennon.

RCV growth is accelerating beyond initial AMP8 expectations, supported by capex

and inflation. The first year of AMP8 confirms a strong investment ramp, with further

acceleration expected into FY27 and additional upside from reopeners. United Utilities

and Severn Trent are now positioned to deliver at or above 10% RCV CAGR, supported by

higher capex envelopes and inflation above regulatory assumptions. In contrast, Pennon

lags at c. 7.2% CAGR, reflecting a smaller programme and limited reopener visibility. RCV

growth remains the primary earnings driver, with upside increasingly linked to execution.

Cost pressures are moderating cyclically but remain structurally elevated. While

energy-driven inflation has eased, underlying opex continues to rise, driven by labour,

contractor costs and expanding asset bases. FY27 guidance points to further increases,