Water companies put on notice to clean up

Water industry regulator Ofwat and the new government have both told regional water company United Utilities to up its game, invest in environmental protections and prevent sewage spills.

However, after water company bosses including UU’s chief executive Louise Beardmore met new environment secretary Steve Reed today (11 July 2024), the Warrington-headquartered utility was told by the regulator they can put bills up by as much as £94 per household over the next five years, a third less than the increase requested by companies.

Nonetheless, Chancellor Rachel Reeves called the price hike, technically part of a Draft Determination, a “bitter pill” for consumers.

Following his supposed dressing down of water company bosses, Reed said: “We will never look the other way while water companies pump sewage into our rivers, lakes and seas.

“This unacceptable destruction of our waterways should never have been allowed, but change has now begun so it can never happen again.

“Today I have announced significant steps to clean up the water industry to cut sewage pollution, protect customers and attract investment to upgrade its crumbling infrastructure.

“That change will take time. Over the coming weeks and months, this Government will outline further steps to reform the water sector and restore our rivers, lakes and seas to good health.”

Ofwat said: “We expect United Utilities to deliver significantly better outcomes for our natural environment over the next few years and to meet its legal obligations: we want lower pollution, healthier rivers and waterways, and the company to do its bit to combat the effects of climate change.”

However, the price hikes sparked anger amongst water campaigners with Feargal Sharkey, a frequent critic of United Utilities, saying it was time to “take to the streets” over the sewage dumps and profiteering.

“We’ve had enough of the greed, we’ve had enough of the exploitation. The rip off, it ends here and it ends today,” he said on daytime TV.

Trade union GMB, which many UU workers are members of, said shareholders should foot the bill, not workers or customers.

Gary Carter, GMB National Officer said: “Ofwat is right that water companies should fork out to clean up the mess they’ve made – not customers

“But that can’t be at the expense of water workers’ terms and conditions – which are the first things to be cut when companies plead poverty.

“Shareholders have trousered fortunes from UK water – they must be the ones to stump up the investment the money industry so desperately needs.”

The change in tone towards the water companies was consistent with a Supreme Court ruling last week that cleared the way for the Manchester Ship Canal Company to bring a claim in nuisance or trespass when the canal is polluted by discharges of foul water from United Utilities’ outfalls.

A statement from United Utilities at the opening of the stock market this morning noted the publication of the Draft Determination by the regulator for the April 2025 to March 2030 period and said it would respond to Ofwat by 28 August 2024. 

At close of play on Thursday the United Utilities share price was 1100p, up from 985p on the day of the General Election.

Russ Mould, investor director at AJ Bell said the market appeared to have priced in some regulatory pressure. “Any negotiation requires give and take and, while the increase in bills announced by regulator Ofwat is less than most names in the sector were looking for, the market reaction suggests this isn’t a bad outcome from the perspective of its listed constituents.

“Note, this is a draft decision and there is scope for firms to push for a bit more generosity before the final verdict in December.”