Sewage scandals and bill increases mark year of woe for water industry

Even by the water industry’s standards, 2024 was a torrid year.

Firms faced more public anger over sewage spills, Thames Water teetered on the brink of collapse and one company even inadvertently poisoned its customers.

It all played out against the prospect of steep rises in bills, which were fixed for the next five years by regulator Ofwat earlier in December.

Here PA news agency looks at the last 12 months – and what could be in store in 2025.

Sewage spills and pollution worsened significantly, according to Environment Agency data.

The issue was so bad in the River Thames that a University of Oxford rower went public about “poo in the water” around the annual boat race in April.

Research found high levels of E. coli were in the part of the river used for the annual race between the University of Oxford and the University of Cambridge.

Further north, United Utilities faced claims that it failed to report more than 100 million litres of raw sewage that it illegally dumped into Lake Windemere over a three-year period.

Analysis found that the company pumped between 143 million to 286 million litres of waste into the lake between 2021 and 2023 at times when it was not permitted.

And down in Devon, South West Water owner Pennon had to pay compensation after a parasite contamination crisis left people in hospital.

The incident in Brixham saw the company forced to provide bottled water to some households for as long as two months.

The outbreak in May left some people in hospital and hundreds of others ill after contamination of the water supply by cryptosporidium, a parasite which causes sickness and diarrhoea.

About 17,000 households and businesses in the Brixham area of Devon, supplied by South West Water (SWW), were issued with a “boil water” notice on May 15, as scores of reported cases of illness emerged in the town.

The notice, instructing them not to use their tap water for drinking without boiling and cooling it first, remained in place for eight weeks for some households in the area.

Consumer groups were incensed when Ofwat announced that water companies would be allowed to hike bills by an average of 36% over the next five years in December.

Firms will be allowed to raise average bills by £31 a year, or £157 in total, over the next five years to £597 by 2030 to help finance a £104 billion upgrade for the sector.

But households face average bill hikes of £86 next year alone, with smaller increases coming in the following years.

Friends of the Earth accused Ofwat of “caving to pressure” from companies, leaving customers to “pick up the tab for decades of under-investment in our crumbling water infrastructure”.

The confirmed increase to bills came in significantly higher than the 21%, or £19 a year, rise per household, outlined in the regulator’s draft proposals in July.

Ofwat chief executive David Black said it gave firms an “opportunity to regain customers’ trust” and would help pay upgrades to improve environmental records and customer services.

“Water companies now need to rise to this challenge, customers will rightly expect them to show they can deliver significant improvement over time to justify the increase in bills.”

But Charles Watson, from environmental group River Action, said the regulator had “failed” and “run up the white flag”.

“The shareholders in these companies are just laughing all the way to the bank,” he added.

London’s water supplier suffered a bitter financial blow in March, when its investors pulled the plug on £500 million of funding that had previously been pledged.

The move raised the prospect of Thames Water running out of money in early 2025 and subsequently being nationalised.

But the company owes its lenders about £16 billion in debt, and many will lose what they are owed if it falls into public hands.

Creditors have drawn up a £3 billion rescue loan to bail it out, which Thames Water presented to a High Court judge earlier in December.

Meanwhile, Ofwat eventually granted Thames Water a 35% bill rise over the next five years versus current levels, less than the 59% the company had asked for.

Russ Mould, investment director at AJ Bell, said the smaller-than-requested increase in bills is “unlikely to be sufficient to resolve its financial problems”.

Ministers hope 2025 will be a turning point for the industry, with new laws set to come into place which could see bosses face up to two years in jail for obstructing regulators.

The Water (Special Measures) Bill, introduced to Parliament in September, hands new powers to Ofwat and the Environment Agency to take action on companies damaging the environment and failing customers.

Meanwhile, a major independent review into the industry will report back to ministers in 2025, which could even recommend abolishing regulator Ofwat.

The UK and Welsh governments announced the review, chaired by former deputy governor of the Bank of England, Sir Jon Cunliffe, in October 2024.

However, despite growing calls to nationalise the industry, officials were clear that bringing companies back into public hands was not part of the remit.

Steve Reed, the environment secretary, said nationalising water firms would cost up to £100 billion and “not resolve the problems” faced by customers.

Mr Reed said the money to pursue nationalisation “doesn’t exist” and rivers, lakes and seas would be “filled with even more sewage and pollution” during the time it would take to unpick current models of ownership.

For campaigners calling for public ownership of water firms, 2025 is set to be another frustrating year.