Water companies in England and Wales have today submitted ambitious plans to the economic regulator Ofwat, proposing the largest ever investment in the sector.

In total, water companies propose investing £96 billion over the period of 2025 – 2030, a 90% increase on the current period. The unprecedented investment is equivalent to more than 40% of total investment in the rest of Europe.

This investment is essential to maintain the highest quality drinking water for a growing population, ensure the security of our water supply in the future and significantly reduce the amount of sewage entering rivers and seas.

If approved by Ofwat, the plans will:

• Build ten new reservoirs to secure our water supplies.
• Cut leakage by over a quarter by 2030 compared with the start of the decade – which will increase performance to among the top five countries in Europe.
• Invest £11 billion to reduce overflow spills – more than triple the current rate and representing the most ambitious modernisation of sewers since the Victorian era. Spills are forecast to reduce by more than 140,000 each year by the end of the decade, thanks to upgrades of sewage works, the creation of new nature-based schemes to manage rainwater and technology to better manage flows.
• Install advanced technology at sewage works to remove over a million tonnes of phosphorus from rivers.

Announcing the plans, Water UK, the body which represents all the UK water companies, said:

“While increasing bills is never welcome, investment in our water system is essential to ensure the security of our water supply in the future. These critical investments will be funded by incremental increases to bills over a five-year period.”

“Water companies understand the impact of the current economic environment and cost-of-living crisis and have, as part of the plans, committed to well over doubling the number of households eligible to receive support – with 3.2 million households set to receive financial support – an increase of 2 million households.”

“The country urgently needs this investment in our water and sewerage infrastructure.”

The average bill increase in England is expected to be an additional £7 per month by 2025, compared with today. This is expected to increase to £13 per month in 2030. Over 1.6 million customers were consulted on the development of the plans, and how improvements should be prioritised.

The record investment builds on the £200 billion that has already been invested in the water system over the last three decades. Water UK said this investment has:

• transformed the quality of our drinking water;
• cut pollution from sewage works by up to three quarters;
• resulted in a sevenfold increase in the number of beaches achieving ‘excellent’ ratings since the 1990s.

Water UK said Ofwat, the independent economic regulator for the water sector, will ensure bills are no higher than needed to fund each improvement and will only approve spending if they agree it is new, necessary and represents value for money. If improvements aren’t delivered, bills will automatically be reduced.

Water UK, Chief Executive, David Henderson said:

“These record-breaking investment proposals will secure our water supply as we deal with a changing climate and a growing population.

“While increasing bills is never welcome, this investment in our country’s infrastructure is essential to ensure the security of our water supply. Water companies are seeking regulatory approval to reduce overflow spills into rivers and seas as fast as possible and to doubling the number of households receiving support to pay their bills.

“Ofwat now needs to back these plans that are both ambitious and vital. Approving the plans is necessary so that we can provide the highest quality drinking water for a growing population, ensure the security of our water supply in the future and reduce the use of storm overflows as much as possible.”

In May, water companies apologised for not giving sufficient attention to the issues the public care about, such as overflow spills, and promised a plan to change this. Water UK said today’s investment proposals will begin that work, and while it will take time to overhaul 100,000km of old sewers, the industry is determined to act.

Water companies will also work with the Government, regulators and others who also have a responsibility to care for water such as farmers, housebuilders and manufacturers. Collective action is needed to protect our precious water resources in this country, Water UK added.

Water companies must deliver a step change in performance and investment

Commenting on the submissions, Ofwat said it is pushing for a step change in performance and investment in the sector to drive improvements for the environment and customers

The regulator added that all company plans will be subjected to “forensic scrutiny” on their ambition for customers and the environment and on the affordability of their plans for customers, saying:

“Customer bills must be fair. Customers will only pay for future investment, not past company mistakes”.

The water companies are today submitting their plans to Ofwat for the next price review period from 2025-2030. The plans will be subject to scrutiny and challenge by Ofwat before final decisions are made in December 2024. Ofwat has told companies that they must be ambitious in their plans to reduce pollution, while delivering value for money for bill payers.

Ofwat wants to see companies transform their performance for consumers and the environment. To drive the change the regulator said it will be putting in place an incentive regime which rewards companies for effective delivery, but hits companies that fail to step-up to the challenge with financial penalties.

The publication of companies' business plans comes at a pivotal moment in the water sector's development.

Ofwat wants companies to also embrace innovation, for example making greater use of digitalisation and using nature-based solutions to help reduce storm overflows.

“Vital that customers only pay for new investment and not to put right past failings”

A statement issued by the regulator said:

“As families struggle with higher household bills it is important that the much-needed improvements in performance and investment offer customers value for money. It is also vital that customers only pay for new investment and not to put right past failings.

“Given that companies are expected to propose an increase in water bills, Ofwat wants companies to build on the progress the industry has already made in supporting customers who are struggling to pay.”

Ofwat said it will provide “a reasonable balance of risk and return, so that companies can attract the funding required to deliver the investment programme and to link returns to performance for customers and the environment.”

Ofwat will also require companies to take account of their performance for customers and the environment, as well as investment needs and financial resilience, when deciding whether to pay dividends.

Commentating on Ofwat's expectations for business plans Ofwat's CEO David Black said:

"The water industry needs to deliver a step change in investment and performance to clean up our rivers and seas, while also helping to ensure that we can meet the challenge of climate change.

"Company business plans are an important first step in the price review process.. Ofwat's role is to forensically scrutinise their proposals, to ensure any increase in bills is justified, efficient and delivers significant improvements in river and bathing water quality. We will assess how companies are helping customers to afford any bill increase.

“As we work through the business plans we will continue to monitor companies' performance, hold them to account for delivering improvements and push them to build meaningful plans to change”.

CCW warns "any proposed substantial bill rises will add to worries of many struggling households"

Mike Keil, Chief Executive of the Consumer Council for Water (CCW), said: 

“Customers want to see investment in improving their services and enhancing the environment but any proposed substantial bill rises will add to the worries of many struggling households. Investment on this scale must come hand-in-hand with fairer and more consistent support for the nearly one in four households who say they are already struggling to pay their water bill. We also want to see evidence in these plans that more water companies are putting their hand in their own pocket to fund a step change in financial supportfor struggling customers.”

“The water industry is at a crossroads with trust in water companies lower than it has been for more than a decade but this is an opportunity to put things right and set us on a more positive path. Customers need to see and feel the difference through the services they receive.”