Britain’s water regulator, Ofwat, has approved an average water bill increase of 36% over the next five years, aiming to fund a major overhaul of the nation’s ailing water infrastructure.
The rise will enable a significant boost in investment compared to initial plans, addressing longstanding issues in the sector.
The approved hike falls short of the 44% average requested by water companies but exceeds the 21% increase suggested by Ofwat in July.
The decision follows mounting public outrage over frequent sewage spills and financial troubles at Thames Water, the largest supplier, which faced the threat of nationalisation earlier this year. In October, the government urged Ofwat to permit increased investment to tackle these challenges in the privatised water sector.
Critics have long accused private water companies of prioritising shareholder dividends over infrastructure improvements, while the sector argues that Ofwat's focus on keeping bills low has hindered investment.
Ofwat announced on Thursday that the higher bills would fund a £104 billion ($131 billion) upgrade aimed at reducing sewage discharges and improving infrastructure. A clawback mechanism will ensure unspent funds are returned to customers.
Under the revised plan, no company will receive the full increases they sought. Thames Water, which requested a 53% hike, will see a 35% rise, while Southern Water, which asked for an 83% increase, will raise bills by 53%.
The additional funding could improve the financial stability of Thames Water, which is seeking over £3 billion in new equity to stay afloat.
However, the proposed bill increases are expected to face backlash from consumers already grappling with rising costs of energy and food during a prolonged cost-of-living crisis.
Adding to the pressure on water companies, Ofwat fined Thames Water £18 million for violating its obligation to link dividend payments to performance, after the company paid two dividends to its parent firm in 2023 and 2024. Photo by Davide Restivo from Aarau, Switzerland, Wikimedia commons.