HS2’s old boss confronts another colossal challenge for Britain

As Britain’s latest and most significant water infrastructure project makes its sedate progress through the fields of eastern England, the ironies are piling up.
Anglian Water is building a 210-mile underground pipeline through six counties from rainy Lincolnshire to historically drier north Essex.
Yet this panacea to the water shortages that are expected to result from climate change has been delayed, not least because 2023-24 was one of the wettest winters on record.
Anglian’s strategic pipeline was given the go-ahead when the company was regarded as one of the best-run entities in the privatised industry. Lapses in recent years on pollution and leakage rates have made it, according to Ofwat, the worst-performing water company in the land (outside Thames Water, that is, whose transgressions are so multiple that it is now regarded by some in the sector as an outlier).
The project is expected to be three years late and it is already 100 per cent over budget, its construction cost having doubled from an estimated £500 million to £1 billion. Its 60cm to 90cm diameter pipes sitting in 1.5m-wide, 2m-deep trenches, are costing nearly £5 million a mile.
If this sounds as if it has shaped up to become an HS2 of the waterways — the high-speed railway so far over budget that the Treasury has all but given up counting — then Anglian Water has a new chief executive who is better placed than most to draw parallels.
Mark Thurston, 57, was appointed this summer to replace Peter Simpson, also 57, who stepped down after 11 years in charge. Thurston spent six-and-a-half years running HS2. He left shortly before Rishi Sunak controversially scrapped the extension of the scheme.
Of his appointment at Anglian Water, which caused much comment not least because of government criticisms of the financial stewardship of HS2, Thurston said this: “If customers want to challenge my appointment, all I can say is that it was a very thorough and comprehensive process. The board clearly thought I was a good fit. They have to account for that and only time will tell whether it was a good appointment.”
The Anglian board represents its five shareholders: the Canada Pension Plan; Adia, the Abu Dhabi sovereign wealth fund (also a shareholder in Thames); the Australian pension funds investor IFM; the infrastructure backer Igneo; and a consortium of local authority pensions funds mainly from the north of England.
Thurston declines to comment on the circumstances of his departure from HS2 or the Conservative government’s decision to abandon it. “There are various versions of what really happened. Any commentary from me … I’ll pass on that. I’ve been gone more than a year now. There’s a new government and a new chief executive is arriving anytime soon.”
He does, however, recognise the parallels between his old and new jobs, including the scale of the projects and the teething troubles.
“This is very different to anything [Anglian] has done in the past. HS2 is getting built at scale, it is civil engineering on an industrial scale and that’s what needs to happen here in due course.”
Lessons learnt include the need to build a “coalition of support,” he said. “The people impacted have to feel that we are doing it with them and not doing it to them.”
After the pipeline, Anglian wants to build two new reservoirs in the west of its region at a total forecast cost of £4 billion to supply the growing populations around Cambridge, Northampton, Bedford and Milton Keynes.
Anglian, he said, is becoming an infrastructure company not just a utility. “What we have in front of us are profoundly important, change-generating projects.”
Thurston was speaking from the middle of a field in deepest Suffolk at Rede, near Bury St Edmunds, the construction site of a 20-megalitre sealed reservoir, a concrete storage tank taking up three quarters the size of a football pitch for treated drinking water pumped from the north at huge pressure and bound for south Suffolk and north Essex.
This watery vault is the largest structure in a project that has been beset by problems, some of which could be foreseen in any large construction job but many more besides: hence the three-year delay and doubling in cost.
The headline reasons for the project are to mitigate climate change and population growth but it owes its existence to regulatory intervention. The Environment Agency is in the process of rescinding Anglian Water licences to abstract water from boreholes to protect the rivers that are affected.
Limits on abstraction from chalk aquifers are due to be in place next year, prompting a 2025 deadline on the pipeline project. Thurston said that was never going to be deliverable. So far, only half the pipeline is in the ground and he is eyeing completion in 2028.
The project’s problems have been manifold. The start was delayed by Covid-19 lockdowns. When construction began the steel for the largest high-pressure pipes was being sourced from Ukraine. When Russia invaded, the supply chain was turned off.
Archaeological factors are a common obstacle and there has been a fair share of Bronze Age burial grounds, Iron Age skeletons and Roman votive offering sites. Enough work, it is said, for the undergraduate excavators and antiquarians to study for the next decade.
Cutting and covering trenches in rural fields is one thing, but in built-up areas roads and railways have to be crossed by directional drilling, small-scale tunnel boring that is five times as expensive and much more time-consuming.
Pipe-laying is also a seasonal game and the normal four-month winter shutdown was much longer during and after last year’s record wet weather.
Then there are the planning gods to appease. DCOs, or development consent orders, granted when a scheme is deemed a nationally significant infrastructure project, smooth the way. The Anglian strategic pipeline was not regarded as “nationally significant” so it did not get the DCOs and the company ended up navigating 14 local planning authorities and countless farmers and landowners along the way.
Learning on the job of this unique scheme has led, the company concedes, to missteps and “wrong decisions”. The pipeline also has to be best-in-class, hygiene-standard infrastructure delivering drinking-quality water.
And construction industry inflation, which has so impacted HS2, is reckoned to have been running at twice the rate of consumer price rises — 20 per cent or more at its worst — because of the acute exposure to energy, materials and labour costs.
Anglian was allowed £500 million in the current regulatory price settlement to build the pipeline. The additional £500 million is being borne by its shareholders, said Thurston, and there is a debate with Ofwat to be had over whether the investors can claw that money back in the future.
At completion the pipeline will be capable of handling 265 megalitres, getting on for 20 per cent of the region’s daily consumption and helping to offset the 182 megalitres the company loses every day in leaks.
“Water resilience issues in this region are significant,” Thurston said. “The industry has never done anything on this scale. We are doing important work here.”
An outsider with no previous experience of the water industry, Mark Thurston admitted that he was bemused by the regulatory complexity, the “fractious” relations between regulators and water companies and “the emotion” the sector excites from politicians, media and the public (Katie Prescott writes).
“The public discourse about water and the national environment has fundamentally changed,” the Anglian Water chief executive of three-and-a-half months said, citing the division in opinion over ownership and funding and “how some of the financial conduct has been called into question”.
Thurston has walked into a storm. The industry is in the middle of its quinquennial price settlement, during which there have been unpleasantries between Ofwat, the economic regulator, and the regional monopolies demanding unprecedented increases in household bills.
At the same time Anglian has been hit with £38 million of penalties from Ofwat, second only to the £56 million levied on Thames Water, accused of an unacceptable level of pollution incidents and failure to reduce leakage as agreed.
“There are things that we have to be better at,” Thurston said. “By all measures we are a lower quartile performing water company, which is not where Anglian has been historically.”
David Black, the chief executive of Ofwat, has said that water companies’ poor performance was not just about money but also culture and leadership.
“People have quite rightly been critical,” Thurston said. “We do need to modernise, we do need to be more professional. Maybe there’s been a bit of drift, a bit of complacency maybe. But the data is undeniable.”
Of the regulatory regime with often conflicting demands between Ofwat and the Environment Agency, he said: “The process has over time become very complicated.” He said he held out hope for reform after the Labour government’s industry review by Sir Jon Cunliffe.
“The relationship between water company and regulator is quite transactional. There is an opportunity to simplify how the process works. The fractious nature [of the relationship] is not in the interest of customers or taxpayers or the environment.”