Millions of households across England may face steeper water bill increases than previously forecast as the Competition and Markets Authority (CMA) prepares to issue its provisional decision on industry spending plans this week.
Five major water companies — Anglian Water, Northumbrian Water, Southern Water, Wessex Water, and South East Water — have appealed to the CMA, seeking permission to raise customer bills beyond the limits set by the water regulator, Ofwat. Collectively, the companies serve 14.7 million customers across England.
Water firms appeal to lift spending caps
Ofwat, which regulates the privatised water industry in England and Wales, previously capped average bill increases at 36% by 2030, raising the typical household charge to £597 a year. The increase was meant to fund a £104 billion investment plan over the next five years.
However, several companies have argued that the investment limits are too restrictive and that higher bills are needed to pay for critical infrastructure upgrades, including replacing aging pipes and tackling sewage overflows.
Thames Water, which serves another 16 million customers, initially joined the appeals process but has paused its case as it negotiates to reduce its massive debt and secure its financial future.
CMA expected to favor investment increases
Industry analysts believe the CMA is more likely to approve higher spending allowances than to cut them, given the widespread recognition of underinvestment in England’s water infrastructure. S&P Global Ratings said the companies have collectively requested up to £2 billion in additional funding on top of the existing £104 billion package.
Martin Young, head of Aquaicity consultancy, noted that Southern, South East, and Wessex Water could see the biggest upward revisions, given the significant gap between their requests and Ofwat’s allowances. He added that Ofwat’s lower assumptions about shareholder returns — compared with Ofgem’s for energy firms — could prompt the CMA to adjust spending limits upward.
Political pressure and public frustration
The issue poses a potential political dilemma for Emma Reynolds, the new UK environment secretary — the tenth to hold the post in a decade. While water companies argue for more investment, public frustration remains high following years of sewage spills and rising household bills.
Reynolds told the Labour Party conference that there would be “no more ripping off the British people,” while pledging to support investment “good for jobs, consumers, and growth.” However, she has not yet outlined how she plans to balance the need for investment with keeping bills affordable.
A government spokesperson blamed the current situation on “full water system failure” inherited from previous administrations, adding: “We are fixing the system to prevent future price hikes.”
Meanwhile, Thames Water’s owners have warned that sewage pollution in rivers could take up to 15 years to fix without major funding increases, underscoring the scale of the challenge facing both the industry and the government.
