Water bills are set to rise more than previously anticipated over the next five years, driven by higher costs and the need for increased investment. We spoke with industry experts to gain insights into the situation.
Ofwat, the regulatory body overseeing water services, is currently determining the extent to which customer bills can increase. Back in July, they provisionally approved an average annual increase of £19 from 2025 to 2030, amounting to a total of £94, a significant 21% rise over the five-year period. However, the final decision on bill adjustments is yet to be made, with more potential increases on the horizon.
This week, the government plans to unveil a set of reforms that promise to be the largest transformation of the water industry since its privatization in the late 1980s. The goal is to shield customers from the growing burden of rising bills while also securing the necessary funding to address issues related to population growth, climate change, and an aging water infrastructure.
The water sector is grappling with numerous challenges, and the bill increases proposed by Ofwat in July varied significantly among different companies. Southern Water is facing the steepest increase at 44%, while Affinity Water is experiencing a comparatively modest rise of 6%. Thames Water, the UK’s largest water provider, is approved to raise bills by 23%, but they have indicated that a 59% increase is essential for their continued operation.
Interestingly, Thames Water’s shareholders declined to provide previously promised funding earlier this year, citing profitability concerns at the proposed bill levels. According to experts, one of the key factors prompting Ofwat to consider larger bill hikes is the increase in financing costs. As we await the regulator’s final decision, the water industry remains in a state of uncertainty.
