The water industry has warned that firms will be unable to deliver reforms such as stopping sewage outflows without even greater bill rises, with crisis-hit Thames seeking more cash from customers than it originally proposed.
A letter from industry trade association Water UK to Ofwat set a collision course between them as firms covering England and Wales met Wednesday’s deadline to submit their responses to the regulator’s draft decisions on their business plans for 2025-2030.
Ofwat has proposed water bills can only rise an average 21%, much less than firms requested.
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Thames Water said separately on Wednesday that the planned curbs meant it could not attract the fresh investment it desperately needed from investors.
Britain’s biggest supplier had initially sought a 44% rise to bills across the five-year period but was now proposing a 52% increase by 2030.
That could rise to a 59% hike, taking the average annual bill to £696, if it is given extra spending allowances by the regulator.
It blamed the latest proposed increase on new projections for its customer numbers.
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‘Uninvestable’
The industry letter, seen by Sky News, mirrored the sentiment expressed by Thames that Ofwat’s draft determinations were not tenable.
It stated Ofwat’s plans would make it “impossible” for companies to attract the level of investment needed and would reduce the UK’s attractiveness to international investors.
For the industry to be appealing to investors it has said high fines for environmental damage must be lessened and bills hiked even higher. This was echoed in the letter.
Unless Ofwat changes course on the business plans and firms become more investible “companies will not be able to deliver for their customers and the environment or play their role in driving much-needed growth in the economy”, the letter said.
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Growth and environmental damage
Economic growth will be constrained and environmental damage will continue unless Ofwat changes its plans, UK Water chief executive David Henderson wrote to David Black CEO of Ofwat.
“Without change, new homes will be blocked, the recovery of our rivers will be slower and we will fail to deal with the water shortages we know are coming.”
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Companies face “the largest ever” cut to investment and “the most punitive targets ever” which will mean there’s not enough money to stop sewage outflows and fix leaky pipes.
“Ofwat’s proposed cuts would delay plans to reduce leaks, sewage discharges and service failures.”
Targets to improve water quality, service and sewage outflows are “increasingly unachievable” and “set the sector (and Ofwat) up to fail”, the letter said.
As some regions face larger cuts than others, Water UK said it would contribute to regional inequalities.
What’s happening with water suppliers?
The industry has faced widespread financial woes, millions in fines for sewage outflows, and creaking infrastructure.
The UK’s largest water supplier Thames Water risks entering a form of government insolvency known as special administration as its parent company has defaulted on debt payments.
The company, which has a debt pile above £15bn, said it had submitted its response to Ofwat’s draft determination,
It described Ofwat’s proposed cap as “not tenable”, adding it rendered its plan as “uninvestible”.
Chief executive Chris Weston said: “We want to deliver a considerable increase in investment in our infrastructure, with total expenditure of £20.7bn in our core plan and a further £3bn through gated mechanisms.”
He added: “The money we’re asking for from customers will be invested in new infrastructure and improving our services for the benefit of households and the environment.
“They are not being asked to pay twice, but to make up for years of focus on keeping bills low.”
Critics accused the water firms of bleeding themselves dry through years of unaffordable dividends. The GMB union was among bodies urging the regulator to hold firm.
Ofwat’s final decision will be published on 19 December.
In response to the letter, an Ofwat spokesperson said: “We expect to receive responses from many organisations, including water companies, customers, environmental and consumer organisations and investors.
“These are likely to reflect a diverse range of views on the proposals we have made. We will consider all of these responses carefully.”