OFWAT APPROVES £3.4BN EXTRA WATER COMPANY SPENDING

The water industry regulator Ofwat has approved £3.4bn in additional spending by water companies in England and Wales beyond what was agreed in 2024. Thirteen companies requested £4.3bn in extra funding to cover unforeseen costs, and Ofwat allowed £3.4bn of that amount. The additional spending includes £1.2bn to safeguard water services and assets, and £477m to support housebuilding and datacentre development. Five companies – Southern Water, Thames Water, Severn Trent, Wessex Water and South East Water – will increase bills before the end of the decade to cover the extra costs, while the remaining eight will add these costs to bills in the 2030s.

The extra spending comes on top of a £104bn investment programme already approved for the five-year period from April 2025 to March 2030, which had already resulted in projected bill rises of 36% over the second half of the decade. Ofwat said it would allow additional funding requests where costs were uncertain or unknown. The £3.4bn approval brings total planned spending close to the water industry's initial request of £108bn for the five-year period. A separate £34m of extra spending has been earmarked to reduce toxic chemicals in the water system, announced following government data showing every English water body is polluted with toxic chemicals.

The spending decisions raise questions about whether water and energy resources are sufficient to support the government's growth agenda. The Labour government has pledged to build 1.5m new homes and has set out ambitions for AI growth zones to host large datacentre complexes. Millions of households in England and Wales will face higher bills as water companies fund these infrastructure developments.