Ofwat attacks water firms’ lack of investment to cut sewage discharges

Ofwat has criticised water companies for failing to invest enough in treatment plants to stop the overuse of raw sewage discharges.

The water regulator for England and Wales said on Tuesday that water and wastewater companies were falling behind on their investment plans, leaving promised service improvements behind schedule or undelivered.

Ofwat sets allowances for how much companies can invest to maintain and improve their water networks. Between 2020 and 2022, 14 companies underspent their budget on improving their water network and eight companies underspent their budget on improving their wastewater network.

The Guardian revealed last week that more than 70% of water firms are owned by international investment funds, private equity firms and businesses lodged in tax havens. Analysts said the structure was focused on extracting money to pay shareholders, rather than the long-term good of the water companies.

The firms have run up net debts of almost £54bn and paid out dividends since privatisation of £65.9bn, while critics say they have underspent on vital infrastructure improvements.

Sewage discharges over the summer closed beaches across the country, as water firms used storm overflows as a routine measure, releasing raw waste into rivers and seas.

Ofwat said on Tuesday the levels of infrastructure investment by the water companies were lower than what companies could have spent.

Affinity Water and Northumbrian Water spent only 47% and 48% of their allowance respectively, and Yorkshire Water and South West Water spent 20% and 39% of their wastewater enhancement allowance respectively.

Ofwat said the main areas of underspend were on improvements to sewage treatment works, improvements to storm tank capacity and reducing spill frequency, and on drought resilience.

David Black, the chief executive of Ofwat, said: “We expect companies to deliver the service improvements they were funded to deliver. No ifs, no buts. The lack of investment from companies we’re seeing at the moment is extremely disappointing, especially in light of the poor performance for customers and the environment.

“Failure to invest or delays to investments mean that vital improvements are not being made or are late. I am expecting these companies to get a grip on their investment programme and make up for the shortfalls to deliver the associated improvements in service.”

Emma Clancy, the chief executive of the Consumer Council for Water (CCW), said: “Customers will feel like they’ve been short-changed if water companies fail to deliver on their promises and that risks eroding trust in the industry.

“Households have a right to expect that their money is being spent wisely and customers have made clear to us they see a resilient water supply, tackling leakage and protecting the environment as priorities.”

The Liberal Democrats’ environment spokesperson, Tim Farron, said: “This is a national scandal. These firms are raking in the cash whilst paying lip service to actually investing, meaning our rivers are poisoned with more sewage by the day.

“Ofwat should be scrapped as it’s letting these water companies get away with it. It has become their powerless accomplice and even praised some of these rogue firms for their investment in cleaning up rivers.

“It is time Conservative ministers did an immediate U-turn and voted for a ban on these sewage discharges. They should create a proper regulator with real teeth to save our treasured rivers and beaches.”