Faarea MasudBusiness reporter
Millions of households in England will have to pay higher water bills than previously announced after the UK’s competition body agreed to let five water companies increase charges.
The companies – Anglian, Northumbrian, Southern, Wessex and South East – had asked for permission to raise bills by more than the amount previously agreed by the regulator, Ofwat.
They argued the rises set by Ofwat – which average 36% over the next five years – were not enough to deliver better infrastructure.
A panel appointed by the Competition and Markets Authority (CMA) has now said the bills can rise on average by an extra 3% – about £12 per year – partly due to the companies facing higher borrowing costs.
An independent group of experts appointed by the CMA said that Anglian and Northumbrian could increase their bills by a further 1%, Southern by 3%, South East by 4% and Wessex by 5%.
The five water companies serve more than 7 million household and business customers, and had asked for much larger increases to bills than the ones granted.
The group appointed by the CMA said the firms had asked to increase bills to raise a total of £2.7bn in extra revenue, but it had allowed only 21% of this, equating to an additional £556m.
“We’ve found that water companies’ requests for significant bill increases, on top of those allowed by Ofwat, are largely unjustified,” said Kirstin Baker, who chaired the group of experts.
“We understand the real pressure on household budgets and have worked to keep increases to a minimum, while still ensuring there is funding to deliver essential improvements at reasonable cost.”
The CMA’s proposals are provisional and Ofwat and the water firms have a chance to respond before the CMA’s final conclusion in a few months.
Water companies finance much of their investment plans with borrowed money. The CMA said part of the reason it had allowed a rise was because interest rates on those loans have risen, making it more expensive for the firms to carry out their plans.
Troubled firm Thames Water also appealed for higher price rises, but has deferred its case until late October while it tries to fix a rescue bid.
Water firms have been told by authorities to fix outdated infrastructure which has been found to be the cause of much river and water pollution. The Environment Agency said serious pollution incidents by water firms went up by around 60% in a year.
Water Minister Emma Hardy said she expected every water company to “offer proper support to anyone struggling to pay”.
Citizens Advice’s Anne Pardoe said: “Ramping up water bills, when people up and down the country are already rationing showers and cutting down on laundry, is going to stretch budgets beyond breaking point”.
She called for the introduction of a national social tariff, in order to help people from low-income households pay for essential bills. Social tariffs are offered by some companies offering services such as broadband and energy, and allow those on benefits access to cheaper bills, although criteria differ from firm to firm.
The CMA’s findings will lead to an additional increase on average of “£1 per household, per month” for customers of the water firms that appealed, said David Henderson, chief executive of Water UK which represents water firms.
When asked by the BBC’s Today programme why the firms themselves could not pay for the needed upgrades, Mr Henderson said shareholders had already invested a lot of their own money, and eight water firms had made a loss in 2024.
“They [investors] don’t have to put money into this sector, they don’t even have to put money into this country,” he said, adding that many “haven’t made a profit in years. This isn’t an industry awash with cash. It is an industry providing vital infrastructure”.
