Households across England are facing steeper water bills than initially anticipated after the competition watchdog approved increased charges from five water providers-though it dismissed the majority of their requested hikes.
On Thursday, the Competition and Markets Authority (CMA) revealed that an independent expert panel tentatively authorized these companies to collectively raise customer charges by £556 million over the next five years. This figure represents just 21% of the £2.7 billion originally sought by the firms.
The five water suppliers-Anglian, Northumbrian, Southern, Wessex, and South East-serve a combined total of 14.7 million customers. The approved adjustments will result in an average 3% increase on top of the 24% rise previously permitted.
Earlier this year, these companies appealed to the CMA, requesting permission to raise bills beyond the limits set by the industry regulator, Ofwat. Their justification centered on the need for additional funding to comply with environmental regulations.
Water pricing has become a hot-button political issue in the UK, fueled by public outrage over frequent sewage leaks contaminating rivers and coastal waters.
Water Minister Emma Hardy acknowledged the public’s frustration with rising bills, emphasizing the government’s commitment to ensuring support for those struggling to pay. She highlighted that investment funds are earmarked for infrastructure improvements rather than executive bonuses, and announced plans for a stringent new regulator aimed at restoring trust and cleaning up waterways.
While most water companies in England and Wales operate privately, their pricing is tightly controlled by Ofwat through five-year regulatory cycles. In December, Ofwat projected that average household water bills could climb by 36% to £597 by 2030 to finance necessary upgrades.
Ofwat estimates that total consumer-funded investment by these companies could reach £104 billion.
Despite the companies’ ambitious requests, the CMA’s expert panel largely denied funding for new projects beyond those already approved by Ofwat. However, it did grant increased returns to investors to account for persistently high interest rates since the initial bill rises were sanctioned.
For example, Anglian Water, serving the east of England and Hartlepool, sought a 10% hike to an average annual bill of £649 but was approved for only a 1% increase to £599. Northumbrian Water, covering the northeast, requested a 6% rise to £515 but received a 1% increase to £495.
South East Water, which supplies drinking water but not sewage services in parts of the Home Counties, asked for an 18% increase to £322 but was granted a 4% rise to £286. Southern Water, operating along the southeast coast, sought a 15% boost to £710-the highest average bill in England and Wales-but was limited to a 3% increase to £638.
Wessex Water, serving the southwest, requested an 8% increase to £642 and received the largest proportional uplift on appeal, a 5% rise to £622.
Although the government has urged regulators like the CMA to prioritize economic growth, insiders involved in the appeals process say this did not influence the panel’s decisions. Notably, Chancellor Rachel Reeves appointed former Amazon executive Doug Gurr to head the competition regulator earlier this year.
Kirstin Baker, chair of the appeals panel, stated: “We found that the water companies’ demands for substantial bill increases beyond Ofwat’s allowances were mostly unwarranted. We recognize the financial strain on households and have aimed to minimize increases while ensuring sufficient funding for vital improvements at a fair cost.”
For many families, these price hikes will exacerbate inflationary pressures on living expenses. Mike Keil, CEO of the Consumer Council for Water, described the additional increases as “highly unwelcome” and questioned the rationale behind permitting higher investor returns. He warned that customers might end up paying more without receiving corresponding service enhancements.
Environmental advocates have criticized the allowance of shareholder profits amid ongoing pollution issues. James Wallace, CEO of River Action, remarked: “Once again, water consumers bear the burden of decades of mismanagement. Millions of households face rising bills while rivers continue to suffer from the failings of privatized water companies. In 2024 alone, four of these five firms caused at least 1.4 million hours of sewage discharges into waterways, starkly highlighting persistent environmental damage.”
The CMA’s ruling will also influence Thames Water, the UK’s largest water provider serving 16 million customers. Thames initially appealed but has paused its request while negotiating a restructuring plan with Ofwat and creditors to reduce debt and avoid temporary government intervention.
Thames Water is reportedly considering seeking an additional £4 billion. Sources close to the company have criticized Ofwat’s pricing approach, arguing that the utility requires significantly more funding to improve its pollution record.
