How high could your water bills go?

Regulator Ofwat has rejected proposals by the water industry to increase bills by an average of £144 over the next five years.

File photo dated 02/08/16 of the logo of water company Thames Water seen through a glass of water. Liberal Democrat environment spokesman Tim Farron has called for Thames Water to be brought into public ownership. Issue date: Wednesday July 10, 2024.
Thames Water has warned that it will run out of money by May 2025. (PA)

Regulators have rejected Thames Water’s proposals to impose a 44% increase on bills, after the firm said it would run out of money by May 2025.

Britain’s biggest water firm, which has a debt pile of more than £15bn, said on Tuesday that it had £1.8bn of cash reserves at the end of June, a fall from £2.4bn three months previously.

Thames Water said it is still looking for new funds needed to maintain and update its infrastructure, after investors pulled the plug on £500m of emergency cash earlier this year.

The firm had wanted to impose a 44% increase in bills over the next five years but on Thursday Ofwat imposed a “turnaround oversight regime” and instead proposed Thames increase average yearly bills by 23% to £535 over the period.

Water firms have already announced proposals to raise prices, prompting concern that the water bills for millions of Brits could drastically increase over the next few years in an effort to plug debts.

A Thames Water bill with UK currency. Cost of living and inflation with increasing prices is affecting many people.
Thames Water wants to increase the cost of bills over the next five years. (PA)

Ofwat has told Thames that it must “fully re-evaluate” its current turnaround strategy, adding that the firm must publish a separate “financial resilience plan”. Ofwat is also considering appointing a so-called independent monitor, which would have “full access” to the company’s financial information, to report on its progress.

Thames will also have to provide a “delivery action plan”, outlining how it intends to improve its performance on sewage spills and leakage, which has been among the worst in the industry in recent years.

Water companies had requested increases averaging £144 over five years, but this too has been rejected by Ofwat, who have instead proposed that bills increase by an average of £19 per year over the next five years. The 21% bill increase is a third less than what was requested by the companies.

The firms wanted to increase their total spending by £29bn but Ofwat said its scrutiny of companies’ cost proposals, to ensure they deliver efficiently, had led to a £16bn reduction.

Chalfont St Peter, UK. 9th July, 2024. Signs have been put up next to the River Misbourne in Chalfont St Peter, Buckinghamshire advising people to keep out of the water. Since January this year Thames Water have been discharging sewage from the Amersham Balacing Tanks into the River Misbourne for more than 3,500 hours. The Misbourne is a precious chalk stream, which runs through Chalfont St Giles and Chalfont St Peter. Sewage overflow was also pumped into the River Misbourne by Thames Water in Chalfont St Peter in the first half of the year following flooding and a rise in groundwater and ther
Since January this year Thames Water has been discharging sewage from the Amersham Balacing Tanks into the River Misbourne for more than 3,500 hours. (PA)

A spokesperson for Water UK said Ofwat’s decision means it “will be repeating the mistakes of the past”. They said it amounted to “the biggest ever cut in investment by Ofwat”.

The spokesperson added: “For far too long, Ofwat has failed to be realistic about the levels of investment needed and what it will take to deliver and maintain necessary infrastructure…

“Water companies are ready to invest in an unprecedented overhaul of the country’s water and sewage infrastructure. Ofwat now needs to let them get on with it.”

Thames Water has 16 million customers in London and the Thames Valley region in the South East. Its plans – now rejected – would’ve seen spending rise to £19.8bn to update its infrastructure and reduce sewage spills. However, that would’ve also involved increasing customer bills by 44%.

Southern Water have already announced a 9% rise this year, adding an extra £40 per year to customer bills. They blamed the increase on inflation and increased costs for energy, fuel and raw materials. However, they want a 91% increase in bills to £915 a year by 2030.

The chart below shows the average increase - or decrease - of customers' water bills in percentage terms.

The data below shows the draft proposals for the average bills customers will be charged by water and wastewater companies in England and Wales by 2029/30. The average bill for 2024/25 is also listed, along with the increase or decrease between the two figures:

Water and wastewater companies:

  • Anglian Water: 2024/25 £491, 2029/30 £557, up £66

  • Dwr Cymru: 2024/25 £466, 2029/30 £603, up £137

  • Hafren Dyfrdwy: 2024/25 £396, 2029/30 £524, up £128

  • Northumbrian Water: 2024/25 £415, 2029/30 £460, up £45

  • Severn Trent Water: 2024/25 £403, 2029/30 £496, up £93

  • Southern Water: 2024/25 £420, 2029/30 £603, up £183

  • South West Water: 2024/25 £497, 2029/30 £561, up £64

  • Thames Water: 2024/25 £436, 2029/30 £535, up £99

  • United Utilities: 2024/25 £442, 2029/30 £536, up £94

  • Wessex Water: 2024/25 £508, 2029/30 £497, down £12

  • Yorkshire Water: 2024/25 £430, 2029/30 £537, up £107

Water-only companies:

  • Affinity Water: 2024/25 £192, 2029/30 £203, up £11

  • Portsmouth Water: 2024/25 £114, 2029/30 £135, up £21

  • South East Water: 2024/25 £230, 2029/30 £248, up £18

  • South Staffs Water: 2024/25 £161, 2029/30 £183, up £22

  • SES Water: 2024/25 £221, 2029/30 £187, down £34

Water firms say they need to increase bills due to the need to spend money on replacing infrastructure. Increases will fund £100bn of spending over the period, which will include replacing ageing, leaking pipes and reducing sewage discharges into rivers and seas.

However, the increases would come off the back of disastrous recent environmental records that sparked a nationwide scandal over pollution. Thames said pollution incidents increased to 350, up on 331 last year, which it blamed on a rainier-than-expected year. They say the number of “serious pollutions” decreased by 18%.

According to Environment Agency data, 2023 was the worst year for sewage spills since records began. Sewage was discharged for some 3.6 million hours across England – a 105% increase from 1.7 million hours in 2022.

Sewage spills at monitored storm overflows in 2023, by water company. (PA)
Sewage spills at monitored storm overflows in 2023, by water company. (PA)

What may be particularly galling for customers is that while water firms have generally been profitable, their profits have been put into dividends for shareholders rather than investing in improvements. In May, Severn Trent hiked its dividend to shareholders after profits rose by a fifth last year, despite sewage spills by the company rising by a third in 2023. With increased sewage spills, the firms are now asking the taxpayer to help bail them out of their financial difficulties.

The bill rises also come in the wake of huge bonus payouts for water firm bosses. Liv Garfield, chief executive of Severn Trent received a £3.2m pay packet for 2023, which includes salary, bonuses and shares. Over the past four years she has earned nearly £13m.

Last month Susan Davy, the chief executive of Pennon – which owns South West Water – saw her pay package jump 58% after picking up a £298,000 shares bonus despite seeing pollution incidents nearly double at the firm last year.

Despite the controversy, Water UK chief executive David Henderson defended asking customers to pay for what he described as “important” investment in the water network.

When asked how water companies can justify rising bills on BBC Radio 4’s Today programme, the head of the trade association for the water industry, said: “We need to increase our water supply and if we don’t make these investments we won’t get it. Unfortunately the investment will paid for up front by the shareholders of the companies and then slowly recouped over time.”

Keir Starmer, UK prime minister, speaks during a bilateral meeting with US President Joe Biden, not pictured, in the Oval Office of the White House in Washington, DC, US, on Wednesday, July 10, 2024. Starmer said he would publish a roadmap showing how the UK would spend 2.5% of its gross domestic product on defence, as the prime minister faced calls from the British military and allies abroad to clarify his policy ahead of this week's NATO summit in Washington. Photographer: Ting Shen/Pool/Sipa USA
Prime minister Keir Starmer has vowed to crack down on the water industry. (PA)

Labour has already ruled out nationalising the water industry. In their manifesto, published during the general election campaign, the party said they want to end water companies “self-monitoring”.

Labour has said it will pursue criminal charges against water company executives responsible for persistent pollution. It also said in its manifesto that regulators would be given new powers to block bonuses against executives who pollute waterways.

Prime minister Keir Starmer’s official spokesman told reporters on Monday: “The government has said in its manifesto that we will put failing water companies into special measures and they will have no choice but to clean up their act. We talked about giving regulators the power to block payment of bonuses to executives who pollute our waterways and impose automatic and severe fines on them for wrongdoing.”