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Water sector needs £270 Bn investment over 25 years
In response to the call for evidence issued by the Independent Commission on the Water Sector Regulatory System, Ofwat presented new findings on the changes needed to make the sector fit for the future, which involve increasing average household water bills to over £2,000 a year by 2050 in England and Wales.
Ofwat warns the sector must invest an estimated £270 billion over the next 25 years to address looming water shortages and environmental issues and their report determined this would inevitably cause costs to be piled on to consumer bills in coming years.
The investment challenge
Ofwat’s analysis highlights a projected shortfall of 5 billion litres of water a day by 2050 due to factors including a growing population, climate change, and pressures on river health. To meet these challenges, £50 billion in additional investment is needed for 30 major water projects aimed at securing new resources and improving the health of the nation’s rivers.
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Overall trust in water companies falls as bills rise
The regulator has already approved £104 billion in funding over the next five years, aimed at reducing sewage pollution by 45% by 2030 and increasing the adoption of innovative solutions, such as AI and digital technologies.
This means bills are also already rising to combat underinvestment, by an average of £123 this year in the biggest rise in consumer bills since the industry was privatised 36 years ago – to replace ageing infrastructure and cut record sewage pollution.
Households’ trust in water companies has fallen to a new low amid a sewage crisis and rising bills, according to the annual Consumer Council for Water’s (CCW) annual Water Matters study.
Just 53% of households felt what they were being charged was fair, falling for a third successive year to reach an all-time low (down 2% on last year). Additionally, less than two-thirds (65%) of households were satisfied they receive value for money for their water service, down 4% to also reach a new low. After sliding to its lowest-ever level last year, the overall trust score for water companies fell again (6.28 out of 10), despite the majority of companies improving their score. Gains were ultimately overshadowed by significant drops in performance for several companies including Thames Water (5.12 out of 10) and South West Water (5.42 out of 10), rates as the two least trusted suppliers.
CCW plan to champion water consumers
CCW is concerned people’s views of the sector may get worse before they get better with the study having been completed before households were told they would face an unprecedented rise in water bills from April 2025. A recent independent report commissioned by CCW suggested Ofwat could have set a lower cost of capital, instead of raising bills, potentially saving billpayers £5.4 billion over the five-year period.
The CCW has laid out its 2025–26 Forward Work Programme, which CCW Chair Rob Wilson says will focus on ensuring “fair, affordable and reliable access to services for water consumers”. CCW has also said water companies must show more consistent ambition over support for vulnerable customers, with water companies across England and Wales due to publish the final versions of their vulnerability strategies in June.