Millions of households across England and Wales are set to face higher water bills following a decision by the industry regulator, Ofwat, to permit an additional £3.4bn in spending by water companies. This new expenditure will be added to a pre-existing £104bn investment program, which had already projected a 36% rise in water bills over the latter half of the decade.
Ofwat revealed on Thursday that it received requests from 13 companies to increase spending by £4.3bn to cover unforeseen costs that were not accounted for in 2024. Of that total, the regulator approved £3.4bn. This funding includes £1.2bn designated to “safeguard” essential water services and assets, alongside £477m intended to support the government’s push for new housing and the development of AI datacentre complexes.
The Labour government has set an ambitious target of building 1.5 million new homes to address the national housing crisis. However, the reliance on water companies to facilitate this growth—and the expansion of energy-intensive datacentres—has sparked concerns regarding whether the UK possesses the necessary water and energy resources to sustain such an agenda.
In addition to infrastructure, £34m has been earmarked to reduce toxic chemicals in the water system. This announcement follows recent government data indicating that every water body in England is currently polluted with toxic chemicals. Further investments are also planned for projects like the Newquay Wastewater Works and infrastructure to support datacentres in East Manchester.
Five specific companies—Southern Water, Thames Water, Severn Trent, Wessex Water, and South East Water—will implement bill increases before the end of the decade to account for this extra spending. For other firms, these costs will be deferred to the 2030s. Specifically, Ofwat noted that an additional £80 will be added to Southern Water bills, £11 for Wessex Water, £8 for Thames and Severn Trent, and £1 for South East Water.
Helen Campbell, Ofwat’s executive director for delivery, stated that the funding allows companies to deliver improvements “without delay.” She emphasized that the investment will unlock housing and business growth while improving water quality and removing Pfas, or “forever chemicals.” Campbell added that the regulator will monitor performance closely, noting that if companies fail to deliver expected improvements, the expenditure can be “clawed back.”
The financial burden on consumers remains significant. In 2024, Southern Water was permitted to raise bills by 53% by 2030, reaching £642. Other increases include 47% for Severn Trent and 42% for Welsh companies Dŵr Cymru and Hafren Dyfrdwy. Thames Water, which was previously fined £18.2m for paying “unjustified” dividends, was also allowed a 35% increase.
Environment Secretary Angela Eagle acknowledged the public’s frustration, stating, “I know that households across the country are watching every pound and I share their frustration that years of underinvestment and toothless regulation has led to this.”
Eagle added that the government has ringfenced money for new infrastructure to ensure it is used solely for fixing existing problems. She pledged to reform the water sector to prioritize the public interest, aiming to keep bills as low as possible while ensuring higher performance standards and cleaner waterways. The report also notes that including to support new homes and datacentres, millions of households in England and Wales face higher bills after water companies were given the green light to spend £3.4bn more than planned. The report also notes that the Labour government has promised to build 1.5m new homes across the country to help solve the country’s housing crisis. The report also notes that the investments will top up the regulated spending plans of £104bn that were approved in late 2024 for the period from April 2025 until March 2030 to just below the industry’s initial request to spend £108bn over the fiv. The report also notes that the investments will top up the regulated spending plans of £104bn that were approved in late 2024 for the period from April 2025 until March 2030 to just below the industry’s initial request to spend £108bn over the five-year period. The report also notes that under the new process, United Utilities was allowed to spend an extra £995m compared with its request for £1.11bn of extra spending, while Severn Trent was granted £329m of its request for £481m. The report also notes that in 2024, the biggest increase was allowed for Southern Water, whose customers will pay 53% more by 2030, at £642.
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