Bernstein on Friday identified Veolia and Severn Trent as its preferred investments within the water sector, pointing to mounting investment needs in France and the United Kingdom as both countries enter a period of significantly higher infrastructure outlays.
The research house reaffirmed "outperform" ratings for both companies, setting a price target of c40 for Veolia and 3,370 pence for Severn Trent. It also maintained an "outperform" rating on United Utilities with a 1,420 pence target and kept a "market-perform" rating on Pennon Group at 600 pence.
UK investment surge and AMP8
Bernstein characterised the UK water sector as entering "a major capex super-cycle." Under the Asset Management Period known as AMP8, which runs from April 2025 to March 2030, total expenditure is expected to reach roughly a3104 billion in 2022/23 prices. That compares with approximately a351 billion allocated over the 2020-2025 regulatory period.
The AMP8 allocation includes targeted spending on key operational priorities: roughly a311 billion has been earmarked for storm overflow improvements addressing an estimated 2,500 overflows in England, while nearly a35 billion is intended for upgrades at wastewater treatment works. The National Audit Office has put the overall enhancement requirement much higher over the longer term, estimating at least a3290 billion of investment will be necessary by 2050.
According to Ofwat data cited in the report, around 60% of water mains in England and Wales were installed before 1981, and approximately 13% of mains are now more than a century old. Bernstein attributes the step change in planned investment to the dual pressures of renewing ageing infrastructure and meeting stricter environmental standards, particularly on storm overflows and wastewater management.
France: rising annual investment and Veolia's position
In France, Bernstein referenced a June 2026 study by La Banque Postale and SFIL projecting annual water-sector investment to grow from about ac6.7 billion in 2024 to between ac10 billion and ac13 billion by 2040. Within this market, Veolia is identified as the leading operator, ahead of unlisted competitors Suez and Saur.
Veolia reported French water revenues of ac3.16 billion in 2025, representing 7.1% of the groups total revenues. The company also secured a major contract in March 2024: a ac4.3 billion, 12-year agreement with the Greater Paris Water Authority covering 133 municipalities and servicing 4 million residents.
Bernstein noted that budgetary constraints at the level of French local authorities could slow the pace of spending. At the same time, those constraints might prompt municipalities to pursue alternative funding approaches and partnership models, areas where Bernstein believes Veolia has prior experience and capability.
Regulatory contrasts and shared operational challenges
The report emphasises that the UK and France employ fundamentally different regulatory and service-delivery frameworks. The UK operates through a privatised model with regulator-set returns, while France relies on contracting at the municipal level without a national water regulator. Despite that divergence, both countries face similar operational pressures: ageing networks and increasingly stringent pollution standards that are pushing up investment requirements.
Overall, Bernstein's sector note frames the coming decade as a period of accelerated capital deployment for water infrastructure in both markets and highlights a shortlist of companies it views as positioned to capture value from those trends.