Key facts
- Water companies in England and Wales have been granted permission to spend an additional £3.4 billion.
- This extra spending is partly to support new housing developments and data centers.
- The funds will be added to an existing £104 billion investment program.
- Water bills are already projected to increase by 36% by 2030.
- Five specific water companies will see earlier bill increases to cover these costs.
Millions of households in England and Wales are set to face higher water bills following a decision by the industry regulator, Ofwat, to permit water companies to spend an additional £3.4 billion. This extra expenditure, which comes on top of an already approved £104 billion investment program, is intended to facilitate new housing developments and support the growth of data centers.
Ofwat announced on Thursday that 13 water companies had requested to spend an extra £4.3 billion due to unforeseen costs. The regulator approved £3.4 billion of this request. The additional funds include £1.2 billion for safeguarding water services and assets and £477 million for enabling housebuilding and data center development. Five companies—Southern Water, Thames Water, Severn Trent, Wessex Water, and South East Water—will be permitted to increase bills more significantly before the end of the decade, while others will spread the costs into the 2030s.
This development raises questions about the UK's resource capacity, as the government aims to build 1.5 million new homes and establish AI growth zones requiring substantial data center infrastructure. Approximately £34 million of the extra spending is also designated for reducing toxic chemicals in the water system, a move announced shortly after data revealed widespread pollution in English water bodies.
Helen Campbell, executive director for delivery at Ofwat, stated that the new funding would enable water companies to proceed with necessary projects without delay, supporting housing and business growth while improving water quality. She assured that Ofwat would monitor company performance, with the possibility of clawing back expenditure if improvements are not delivered. Specific allowances include nearly £1 billion for United Utilities and £329 million for Severn Trent.
The increased spending is expected to further strain household budgets. Southern Water customers face a potential 53% rise by 2030, with significant increases also for Severn Trent and Welsh water companies. Thames Water, which was previously fined £18.2 million for unjustified dividends, will see a 35% bill increase by 2030. Environment Secretary Angela Eagle acknowledged public frustration over underinvestment and weak regulation, promising reforms to ensure bills remain low and water quality improves.