Millions of households in England could face bigger water bill increases than previously expected as the Competition and Markets Authority (CMA) prepares to issue a preliminary decision on water industry spending plans.
Five water companies—Anglian, Northumbrian, Southern, Wessex, and South East—appealed to the CMA seeking permission to raise bills above the levels previously set by the industry regulator, Ofwat. Together, these companies serve nearly 15 million customers. Thames Water, serving another 16 million, has paused its appeal amid debt negotiations.
Under England and Wales’s largely privatised water system, Ofwat sets household bills over five-year periods. In December, Ofwat forecasted that average annual bills could rise 36% to £597 by 2030 to fund infrastructure improvements. The companies argue that additional spending is needed to upgrade aging infrastructure, and any extra costs would be added to customer bills.
Industry analysts say the CMA is more likely to approve higher spending than reduce it, given the urgent need for investment. S&P Global Ratings reported that the companies are requesting up to £2 billion in extra spending, on top of £104 billion already allowed over five years, though the CMA’s stance remains unclear.
The CMA initially aimed to publish provisional determinations by mid-September but delayed the decision to early October. Water industry experts expect an announcement as soon as this week, although it could slip further. Martin Young, who runs the Aquaicity consultancy, said Southern, South East, and Wessex could see increased spending allowances because their original requests were much higher than what Ofwat approved.
Ofwat’s assumptions about the cost of equity—shareholder returns—are lower than those used by the energy regulator, Ofgem, meaning the CMA could adjust allowances upward. However, sources suggest the regulator may face political pressure to limit price increases, especially as the government plans a new regulator to replace Ofwat. Former environment secretary Steve Reed said in July that households should “never again be hit by the shocking bill hikes we saw last year.”
New environment secretary Emma Reynolds said at the Labour party conference that there would be “no more ripping off the British people,” while also committing to investment “good for jobs, consumers, and growth.” Reynolds has yet to clarify how she plans to balance keeping bills low with funding infrastructure improvements to prevent leaks and sewage overflows.
Thames Water’s owners recently warned that the company may need up to 15 years to clean up sewage pollution in rivers due to the scale of investment required. An insider said Ofwat had taken a “blinkered approach” in setting spending allowances. Thames Water could resume its CMA appeal for higher bills if government concessions are not granted.
A government spokesperson said: “This government inherited a failing water system, leaving infrastructure crumbling and sewage spilling into rivers. We are fixing the system to prevent future price hikes, while addressing public frustration over rising bills.”
The CMA decision is expected to signal whether households will face further increases, amid ongoing debates over investment, environmental obligations, and political pressures surrounding the water sector.
