The chief executive of Water UK, David Henderson, has stated that water companies must be allowed to raise bills by more than the proposed £19 a year in order to tackle the UK’s aging water infrastructure and address the ongoing sewage spills crisis.
His comments come amid growing public outrage over leaks and sewage discharges, which have intensified criticism of water companies‘ management and spending practices.
Speaking to the BBC’s Today programme, Henderson acknowledged the public’s frustration, saying, “People are angry and they’re right to be angry.”
However, he emphasized that the water system in the UK is “tired and old,” and without significant investment, the problems plaguing the industry would persist.
The Debate Over Bill Increases
In July, the water regulator Ofwat proposed capping water bill increases at an average of £19 a year as part of its draft decision on the business plans of water companies from 2025 to 2030. The final decision is expected in December.
However, Water UK has argued that this proposed increase is insufficient and would pose a “material risk” to companies’ ability to secure the necessary investment to stop leaks and prevent sewage spills.
Henderson warned that if Ofwat does not revise its proposal, investors may be reluctant to provide the capital needed to upgrade the water system.
“No rational investor is going to put their money into water right now,” he said, adding that the current regulatory environment does not provide sufficient returns to attract investment.
Water companies have requested higher bill increases than those proposed by Ofwat, arguing that without the ability to charge more, they will not have the funds required to invest in infrastructure improvements.
They maintain that the cost of addressing leaks and preventing sewage spills is substantial, and without a higher revenue stream, progress will be slow.
Public Outrage and Union Response
Water firms have faced a fierce backlash in recent years over sewage discharges into rivers and the sea, as well as ongoing leaks that waste billions of liters of water annually.
Critics, including environmental groups and consumer advocates, argue that water companies have historically neglected infrastructure investment in favor of paying executive bonuses and shareholder dividends.
The GMB Union was quick to criticize Henderson’s remarks, calling the claims from water companies “absolute balderdash.”
Gary Carter, GMB’s national officer, stated, “Water companies have had the money, failed to invest in plugging leaks and preventing sewage spills, and now want more money to do what they failed to do.”
Carter also called on shareholders to take responsibility for the necessary investments that companies had promised but failed to deliver.
The union’s position reflects a broader sentiment among the public and environmental campaigners who are frustrated by the perceived mismanagement of the UK’s water resources.
In 2022, raw sewage spills into England’s rivers and coastal waters more than doubled, highlighting the scale of the problem.
An investigation revealed that sewage had potentially been released illegally by England’s water companies approximately 6,000 times last year in breach of their permits.
The Role of Investors and Shareholders
Henderson rejected the notion that the amount paid out in dividends to investors in recent years was the reason water companies lacked sufficient funds for investment.
He argued that the returns received by investors were set by the regulator, Ofwat. “If you want investors to put their money into the UK, they need to receive a return,” he said.
According to Henderson, water companies have been calling for increased investment for over a decade, but Ofwat has repeatedly denied the industry the funds it needs to make the necessary improvements.
“Every five years, Ofwat has denied the industry sufficient funds to invest as we need,” he said.
He also warned that without more investment, essential infrastructure projects such as hospitals and housing developments could be delayed or canceled due to a lack of water resources.
However, critics argue that water companies’ focus on shareholder returns has contributed to the current crisis.
Thames Water, the UK’s largest water company, has seen its shareholders abandon plans to invest more money, pushing the company into a financial crisis.
Alongside Yorkshire Water and Northumbrian Water, Thames faces a combined £168 million in fines from the regulator for failing to address years of leaks.
In response to the crisis, Ofwat has suggested a ban on director bonuses until leaks and sewage spills are dealt with.
This proposal reflects the growing pressure on water companies to prioritize investment in infrastructure over executive pay and shareholder returns.
The Regulator’s Perspective
An Ofwat spokesperson told the BBC that the regulator would carefully consider all responses to its proposals, which are required by midday on Wednesday.
“We expect to receive responses from many organizations, including water companies, customers, environmental and consumer organizations, and investors,” the spokesperson said. “These are likely to reflect a diverse range of views on the proposals we have made.”
Ofwat’s proposed cap on bill increases is part of its broader effort to balance the needs of consumers with the need for investment in the water industry.
While the regulator acknowledges the importance of addressing leaks and sewage spills, it is also mindful of the impact that higher bills could have on households already facing financial pressures.
The Path Forward
As the debate over water bills and infrastructure investment continues, water companies, regulators, and consumer groups will need to find a solution that addresses the UK’s aging water system while minimizing the financial burden on consumers.
Henderson’s warning that “no rational investor” would currently put their money into the UK water industry underscores the challenges facing the sector.
The next few months will be critical as Ofwat reviews the responses to its proposals and prepares its final decision. Whether the regulator will adjust its proposed bill increase cap or maintain its current stance remains to be seen.
In the meantime, the public’s anger over sewage spills and leaks shows no signs of abating, and the pressure on water companies to deliver meaningful improvements will only intensify.
