Water Companies as Place-based Anchors
How anchor institutions can form part of a community wealth building approach to local economic development
Words by CLES | published as an EWSC Research Insights
Key Takeaways:
This article explores the function of anchor institutions as part of a community wealth building approach to local economic development, and the potential of water companies as place-based anchor institutions. These are three main takeaways:
- Community wealth building is an approach to local economic development which seeks to improve the lives of people in a community by ensuring that wealth that is generated in an area is broadly held and circulates within the locality rather than being extracted by distant shareholders.
- Anchor institutions are a primary deliverer of community wealth building and have a broad role in a place as agents that can affect economic and social wellbeing by developing closer links between the economy, wealth creation and local people.
- Water utilities have a clear role as anchor institutions, and there is significant potential to utilise their procurement spend (£5.8bn), employment (127,000 people) and land (781 sq. miles) to deliver positive social, economic and environmental outcomes.
1. Water Companies as Place-base Anchors Enabling Water Smart Communities
CLES’s work delivering community wealth building approaches to local economic development has taught us that collaboration and the delivery of positive social, economic and environmental outcomes which go beyond an organisation’s “core” functions is more possible when these organisations have a sense of social purpose and recognise their roles as stewards of place. For water utilities to deliver water-smart communities at scale, in response to the climate crisis but also in a way that tackles the economic challenges faced by our people and our places, they must consider their role as stewards not only of the environment but of local economies.
2. Growing Inequality
Our economy is not working in ways which support individuals, families, and communities. OECD data shows that the UK is an international outlier when it comes to wage growth, sitting below 2008 levels and positioning UK at 27th place out of the 33 OECD countries. In 2020/21, around one in five people in the UK (20%) were in poverty — 13.4 million people. Of these, 7.9 million were working-age adults, 3.9 million were children and 1.7 million were pensioners — meaning one in four children in the UK were living in poverty (27%) (Joseph Rowntree Foundation, 2023).
We are facing a cost-of-living crisis driven by huge spikes in inflation with the Office of Budget Responsibility (OBR) forecasting in its November 2022 outlook that the Consumer Price Index (CPI) measure of inflation would peak at a 40-year high of 11% (Office for Budget Responsibility, 2023). Interest rates have followed suit causing significant additional burdens via mortgage costs, further reducing the spending power of the average household.
The Trussell Trust, the UK’s leading food bank operator, is providing more emergency food parcels than ever before. Over the 6-month (Apr-Sep 2022) period more than 320,000 people have been forced to turn to food banks in the Trussell Trust network for the first time. Amidst a wave of public sector strikes focused on demands for wage rises which reflect the pressures of the rising cost-of-living, a study of over 1,000 nurses, health and social care workers found that 14% of nurses have started using food banks since the cost-of-living crisis started.
The Trussell Trust, the UK’s leading food bank operator, is providing more emergency food parcels than ever before. Over the 6-month (Apr-Sep 2022) period more than 320,000 people have been forced to turn to food banks in the Trussell Trust network for the first time. Amidst a wave of public sector strikes focused on demands for wage rises which reflect the pressures of the rising cost-of-living, a study of over 1,000 nurses, health and social care workers found that 14% of nurses have started using food banks since the cost-of-living crisis started.
3. Increasing Concentration of Wealth
The wealthiest 10% of households hold 43% of all the wealth in Great Britain; in comparison the bottom 50% hold only 9%. The richest 1% of households hold average total wealth of more than £3.6 million each, while the least wealthy 10% of households hold an average of £15,400 or less (Household total wealth in Great Britain: April 2018 to March 2020, ONS, see here).
Corporate profits have surged as the economy has bounced back post Covid (see graph below). The UK now has a record number of billionaires according to the new Sunday Times Rich List (Sunday Times Rich List, Sunday Times, see here). The combined wealth of the UK’s 177 billionaires in the 2022 list stands at £653bn, which is up by more than £55bn (9.4%) from the previous year.
4. The Extraction of Wealth
If we look at the long run trend in the share of wealth that is given to labour in the form of wages, we can see that since the early 1900’s the total share of wealth that went into the pockets of workers has been falling, and since a peak in the late 1970’s the total share of income has fallen from around 70% to below 55%.
5. What Do We Mean by Community Wealth Building?
Community wealth building is a progressive approach to economic development, that seeks to improve the lives of people in a community by ensuring that wealth that is generated in an area is broadly held and circulates within the locality rather than being extracted by distant shareholders. In this way, communities are put first, and people are provided with opportunity, dignity and well-being.
CLES’s model of community wealth building is built around 5 key principles which collectively can be influenced to build greater wealth in a place. Interventions in flows of finance, the use of land & property, patterns of spending and workforce policies come together to build an economy which can be supported to grow and lock wealth into a place.
We describe this process of locking in wealth as building a more generative economy, A generative economy promotes supports and grows forms of business that circulate more of their wealth within a local economy as opposed to forms of business which extract wealth through shareholder dividends (CLES, 2020).
5. What are Anchor Institutions?
Community wealth building has a particular focus on the activities of anchor institutions — large organisations which have a significant stake in their place and can, through changes in organisational behaviour, produce more favourable local economic, social, or environmental outcomes.
The responsibilities that anchor organisations have extend beyond their core delivery activities, they have a broader role as agents that can affect economic and social wellbeing by developing closer links between the economy, wealth creation and the people. By doing this, anchor organisations affect the social determinants of health — the conditions in which people are born, live, and work.
Community wealth building strategies focus on harnessing the collective potential of institutions in a place, such as local authorities, hospitals, and universities, to advance social justice through their behaviour as anchor institutions, but community wealth building strategies around the UK are increasingly considering the role of private sector actors, building on a growing corporate commitment to environmental, social, and governance (ESG) impacts within places. Anchor networks are increasingly involving airports, sports teams and rooted local businesses who are committed to locking in wealth to the places in which they operate.
An anchor institution can usually be defined by the following characteristics:
- Having an important presence in a place, usually through a combination of being largescale employers, among the largest purchasers of goods and services in the locality, controlling large areas of land and/or having relatively fixed assets.
- Are tied to a particular place by their mission, histories, physical assets, and local relationships. Examples include local authorities, NHS trusts, universities, trade unions, large local businesses, the combined activities of the community and voluntary sector and housing associations.
They can also be entities that provide critical services and vital assets to improve economy, health, environment and well-being in communities.
6. Water Utilities as Anchor Institutions
Water utility companies clearly meet the definition of an anchor institution, sharing the key characteristics which define them. They are place based organisations with a long-term interest in the vitality of all the communities they serve, including those who are suffering from poverty or disadvantage. They are responsible for significant fixed assets, many companies (to varying degrees) own land and have a sizeable investment in the infrastructure of a place. But they also employ a significant workforce and are major buyers of goods and services in the economy, having extensive supply chains. Some water utilities are already delivering a level of anchor activity, however this is not universal.
Water utilities manage our water, a finite resource, and a necessity for all. Water is a public good and is considered a part of the ‘commons’, land or resources belonging to or affecting the whole of a community. Extreme weather such as droughts and flooding already have a significant impact on water companies’ ability to operate effectively — droughts and flooding are already devastating communities, as well as presenting challenges in relation to water infrastructure. These instances will only become more frequent in the future if concerted action is not taken to mitigate and adapt to the climate emergency. Therefore, these companies have a huge opportunity to play an active role in safeguarding our water resources and the environment for future generations. This opportunity requires water utilities to act on the responsibility to sustainably manage these resources and environmental assets, as well as taking on a significant role in improving the environment and supporting the delivery of the UK’s net zero targets.
Water smart communities can foster this concerted action to mitigate and adapt to climate emergency by bringing together communities, water utilities and a wider network of stakeholders to developing local strategies for water risk resilience.
7. The Untapped Potential of Societal and Public Value
The water utilities in England & Wales have an annual revenue in excess of £13bn and spend over £8.5bn in staffing and operating costs each year. This includes an estimated procurement spend of £5.8bn
The water industry are significant purchasers of goods and services. They are major users of chemicals, PPE and safety equipment, and physical infrastructure such as pipes and pumps, as well as more general goods and services used by large organisations such as IT equipment and systems, generalised construction and facilities management. Therefore, through their supply chains, water utilities could have significant influence over economies.
The industry employs approximately 127,000 people. Due to this significant contribution to the labour market, water utilities are well positioned to provide well paid and fair employment for people in the areas that they operate. The breadth of jobs within the utilities also means they can offer positions in a wide range of roles, from customer service advisors to water treatment specialists, from entry level jobs to highly technical and specialised roles.
The water utilities of England and Wales are some of the largest corporate landowners in Britain — collectively they own of 423,952 acres (781 sq. miles), an area larger than Greater London (607sq miles). This presents water utilities with an opportunity to contribute to progressive local economic development, through the socially and environmentally just use of their land and assets — through environmental stewardship to mitigate and adapt to a changing climate, as well as utilising appropriate land and assets to support community resilience within the context of a deepening cost of living crisis.
Water utilities have a clear role as anchor institutions, supporting their local communities, promoting environmental justice, sustaining critical infrastructure, and working as a partner with others to advance community wealth building.
Where water utility companies acknowledge and begin to utilise their economic heft as anchor institutions, they can make significant contributions to progressive local economic development that benefits people, planet and place.
This article is written by CLES (The Centre for Local Economic Strategies), the national organisation for local economies. CLES contributed research on the theme of stewardship and the role of water companies as anchor institutions. This article is one of four produced by CLES: Amplifying impact through Anchor Networks; Shaping local economies through anchor activity; and Place-based stewardship in other sectors.
As Discovery research lead and series editor, Arup’s Transformation & Design Studio led the multi-partner research effort contributing public innovation and strategic design expertise.
This is one of a series of insight articles produced as part of the EWSC innovation programme, exploring how integrated water management can be delivered through innovative housing and stewardship models. For an overview of the project, latest news or to get in touch visit https://www.ewsc.org.uk/.
