Investing.com — Bernstein named and as its top picks in the water sector on Friday, citing rising investment requirements in both the United Kingdom and France as the two countries enter a phase of significantly higher infrastructure spending.

Bernstein assigned “outperform” ratings to Veolia, with a price target of €40, and to Severn Trent, with a target of 3,370 pence, reiterating both ratings.

It also reiterated an “outperform” rating on at 1,420 pence and a “market-perform” on at 600 pence.

The UK water sector is entering what Bernstein described as “a major capex super-cycle,” with total expenditure under the current Asset Management Period, AMP8, running from April 2025 to March 2030, set to reach approximately 104 billion pounds in 2022/23 prices, up from approximately 51 billion pounds over 2020–2025.

Of that total, approximately 11 billion pounds is earmarked for storm overflow improvements targeting around 2,500 overflows in England, while nearly 5 billion pounds will go toward upgrading wastewater treatment works. 

The National Audit Office has estimated that at least 290 billion pounds of enhancement investment will be needed by 2050.

The step change is driven by the need to renew aging infrastructure and comply with stricter environmental standards, particularly around storm overflows and wastewater management, the report said. 

Ofwat data indicate that around 60% of water mains in England and Wales were installed before 1981, with approximately 13% now over 100 years old.

In France, annual water investment is projected to rise from approximately €6.7 billion in 2024 to between €10 billion and €13 billion by 2040, according to a June 2026 study by La Banque Postale and public development bank SFIL cited in the report.

Veolia is the leading operator in the French water services market, ahead of unlisted rivals Suez and Saur, the report noted. 

The company reported French water revenues of €3.16 billion in 2025, or 7.1% of group total revenues. In March 2024, Veolia won a €4.3 billion, 12-year contract with the Greater Paris Water Authority covering 133 municipalities and 4 million residents.

Bernstein said budgetary constraints on French local authorities could weigh on the pace of investment but might also “encourage municipalities to explore alternative financing solutions and partnership models – areas where Veolia has experience.”

The two countries use fundamentally different regulatory models, the UK operates a privatised, regulator-set return framework, while France relies on municipal-level contracting with no national water regulator, yet both face comparable operational challenges, including aging networks and tightening pollution standards.