Millions of households across England are poised to face higher water bills than initially anticipated, following a decision by the UK’s Competition and Markets Authority (CMA) to permit five water companies to augment their charges.
Anglian Water, Northumbrian Water, Southern Water, Wessex Water, and South East Water had requested authorization to elevate bills beyond the levels previously sanctioned by the industry regulator, Ofwat.
These companies contended that the price increases stipulated by Ofwat – averaging 36% over the next five years – were insufficient to facilitate necessary infrastructure enhancements.
A panel convened by the CMA has now determined that bills may increase by an additional 3% on average, equating to approximately £12 per year, citing factors such as elevated borrowing costs for the companies.
According to the independent CMA-appointed expert group, Anglian Water and Northumbrian Water are permitted to raise their bills by a further 1%, Southern Water by 3%, South East Water by 4%, and Wessex Water by 5%.
Collectively, these five water companies serve over 7 million household and business customers. Their initial requests for bill increases were significantly higher than those ultimately granted.
The CMA group reported that the firms sought to raise a total of £2.7 billion in additional revenue through these increases, but it only approved 21% of this amount, corresponding to an extra £556 million.
“We’ve concluded that the water companies’ requests for substantial bill increases, exceeding those already permitted by Ofwat, are largely unjustified,” stated Kirstin Baker, who chaired the expert group.
“Recognizing the considerable strain on household budgets, we have endeavored to minimize increases while ensuring adequate funding for essential improvements at a reasonable cost.”
The CMA’s proposals are currently provisional. Ofwat and the affected water companies will have an opportunity to respond before the CMA issues its final decision in the coming months.
Water companies typically rely on borrowed funds to finance a significant portion of their investment plans. The CMA indicated that the rise in interest rates on these loans, making it more expensive for the firms to execute their plans, was a contributing factor in its decision to allow a price increase.
Thames Water, which is facing financial challenges, also appealed for higher price increases but has postponed its case until late October as it attempts to finalize a rescue package.
Authorities have instructed water companies to address outdated infrastructure, which has been identified as a major source of river and water pollution. The Environment Agency has reported an approximate 60% year-on-year increase in serious pollution incidents involving water firms went up by around 60% in a year.
Water Minister Emma Hardy emphasized her expectation that all water companies will “provide appropriate support to anyone struggling to pay their bills.”
Anne Pardoe of Citizens Advice warned, “Increasing water bills at a time when individuals across the country are already reducing shower times and limiting laundry will push household budgets to their breaking point.”
She advocated for the establishment of a national social tariff to assist low-income households in affording essential bills. Social tariffs are currently offered by some providers of services such as broadband and energy, offering those receiving benefits access to reduced rates, although eligibility criteria vary.
David Henderson, chief executive of Water UK, representing water firms, stated that the CMA’s findings will result in an average additional increase of “£1 per household, per month” for customers of the appealing water companies.
When questioned by the BBC’s Today program as to why the firms themselves could not finance the necessary upgrades, Mr. Henderson responded that shareholders had already invested substantial amounts of their own capital, and that eight water firms had reported losses in 2024.
“Investors are not obligated to invest in this sector, or even in this country,” he said, adding that many “haven’t made a profit in years. This isn’t an industry awash with cash. It is an industry providing vital infrastructure.”
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