Ofwat is warning that water and wastewater companies are falling behind on their investment plans, with some companies using less than half of their allowances to improve their water network, leaving promised service improvements behind schedule or undelivered.

As part of the water sector price review process, Ofwat sets allowances for how much companies can invest over the price control period, to maintain and improve the water network.

During the 2020-2022 period companies generally underspent their forecast cost allowance on wholesale water and wastewater enhancement activities. At a sector level, water and wastewater companies spent 68% of their forecast enhancement cost allowance. Out of the 17 water and wastewater companies in England and Wales, 15 companies underspent their allowance.

According to Ofwat, Affinity Water and Northumbrian Water spent just 47% and 48% of their water enhancement allowance respectively, and Yorkshire Water and South West Water spent just 20% and 39% of their wastewater enhancement allowance respectively.

The main areas of underspend across both categories include drought resilience, improvements to sewage treatment works, improvements to storm tank capacity and reducing spill frequency.

Ofwat CEO:  "We expect companies to deliver the service improvements they were funded to deliver. No ifs, no buts"

David Black, CEO said:

"We expect companies to deliver the service improvements they were funded to deliver. No ifs, no buts.

"The lack of investment from companies we're seeing at the moment is extremely disappointing, especially in light of the poor performance for customers and the environment. Failure to invest or delays to investments means that vital improvements are not being made or are late. I am expecting these companies to get a grip on their investment programme and make up for the shortfalls to deliver the associated improvements in service."

The data comes from Ofwat's Water Company Performance report, formerly the Service Delivery Report, which will be published in full on 8 December 2022.

The water sector said the companies had cited several factors causing delays in their programme delivery, including Covid-19 impacts and supply-chain issues related to Brexit.

CCW says companies must ensure they deliver promised investment before seeking any further bill increases

Commenting in response to Ofwat’s announcement that water companies are falling behind on their investment plans, Emma Clancy, Chief Executive of the Consumer Council for Water (CCW), said:

“Customers will feel like they’ve been short-changed if water companies fail to deliver on their promises and that risks eroding trust in the industry. Households have a right to expect that their money is being spent wisely and customers have made clear to us they see a resilient water supply, tackling leakage and protecting the environment as priorities. Companies need to up the pace and make sure they deliver the investment they’ve promised before seeking any further bill increases in the future.”