Environmental campaigners have derided claims by the boss of water regulator Ofwat that public outrage over the sewage crisis was to blame for the precarious financial position of several water companies.
Giving evidence to MPs on Tuesday, Ofwat chief executive David Black said public criticism of water companies was making it harder to attract fresh investment into the sector.
Ofwat has been criticised for allowing water firms to underinvest in sewerage systems and has provisionally said customers’ bills will rise by 21 per cent by 2030 to allow for investment in infrastructure to tackle leaks and sewage spills.
Black said some firms are still able to raise fresh financing, which suggests the sector remains “attractive to investors”.
“But it is a challenge in terms of a lot of the criticisms of the sector. That does unsettle investors,” he told the Environment, Farming and Rural Affairs (EFRA) Committee.
When asked what the regulator is doing to help attract investment, he pointed to a financial rewards system for companies who beat targets on things like reducing sewage spills.
“We’re trying to link companies’ revenues and their profits to good outcomes to customers and the environment,” he said.
Responding to the comments, Nick Measham, CEO of the campaign group WildFish, said it was “disingenuous” to suggest the public was to blame for the challenges water companies face.
He said investors are “nervous” because the Government and its regulators “has left the industry in a position whereby it can’t afford to carry out the big investments it needs without relying on customer bill increases”.
Water companies have come under intense public criticism for the amount of raw sewage that is being dumped into rivers, lakes and seas.
Campaigners have argued that there has not been enough investment in the UK’s sewerage network over a period of decades, which means the infrastructure does not have enough capacity to deal with waste. The water industry has apologised for not acting sooner to address sewage spills.
Many have blamed Ofwat, the sector’s economic regulator, for keeping water bills too low and allowing private water companies to pay high dividends instead of investing.
“The Government and its regulators have failed the public, not the other way round, because they didn’t force the industry to make the investments it should have been making to have sufficient capacity to treat sewage rather than stick it in our rivers,” Mr Neasham said.
James Wallace, CEO of River Action, added: “Of course it’s difficult to raise investment for a corrupt water industry whose name is dirt for killing our rivers, lakes and seas.
“International investors have picked over the remains of water companies like vultures on a decomposing carcass, and proven the privatisation experiment has failed. We need the new Government to show leadership by dealing with the root causes of the sewage pollution scandal, not appease these rapacious, faceless investors.”
Several water companies have sought equity injections as they struggle to make payments on large debt piles they have accumulated.
Earlier this year Thames Water warned it was going to run out of cash by the end of 2024 before securing a loan of up to £3bn that it said will keep it afloat until October next year.
Poor quality bathing spots
Black’s appearance at the EFRA Committee came as new annual data was published revealing that poor quality swim spots in England have soared to their highest level in at least nine years.
Annual data from the Environment Agency (EA) showed that the proportion of bathing waters, such as beaches, that have not met the minimum standard jumped from 4.3 per cent to 8.2 per cent in 2024.
The EA said this jump in poor quality spots was due to the 27 new bathing spots added in 2024, of which 18 were classified as “poor”.
The vast majority of England’s 450 bathing spots are at beaches, but many of the new bathing spots are in rivers, where water quality tends to be poorer.
The new bathing spots were designated following a campaign for more bathing spots in rivers to help improve water quality monitoring at these sites.
Dr Claire Robertson, rivers project officer at Thames21, which campaigned for two bathing spots along the Thames, told i there was more the EA could do to improve water quality at these sites.
“In the legislation, it says the year after [a site] receives a poor designation, the authorities have to put in measures to improve the water quality there,” she said.
“We’re not really seeing them say, ‘Okay, we recognise that it’s got poor, these are the steps that we’re taking to make it good’.”
Giles Bristow, chief executive of Surfers Against Sewage, said the bathing water classification regime “isn’t just inadequate, it’s misleading and needs radical reform”.
He called for the consultation to deliver a year-round bathing season to reflect how people used their local waters, with year-round testing, multiple monitoring points and testing for a wide range of pollutants.
River Action’s Wallace said the results were an “international embarrassment”.
He said: “The Government’s own data shows that swimming in our inland bathing sites poses serious health risks, highlighting the failure of regulators to protect waterways from polluters.
“Awarding bathing water status should ensure that water companies clean up their act urgently,” he said.
A spokesperson for Water UK which represents water companies said the quality of English bathing water remained high, in stark contrast to the 1990s when less than a third of waters would have met current standards.
“However, any drop in standards is a cause for concern and we agree with the Environment Agency that further action is needed to improve bathing water quality.
“This year saw a record number of new bathing water designations and, while water companies are supporting communities to improve new bathing areas, it will take time and investment for real change to be seen,” the spokesperson said.
#1. RIVER HEALTH: 77% rivers in good health by 2027
Current situation: England’s rivers were once havens of biodiversity, but the vast majority are now struggling to support healthy ecosystems of plants and wildlife. Just 14 per cent of rivers in England are currently in good ecological health and not a single river has achieved good chemical health. The Government has set a legal target that 77 per cent will achieve good ecological status by 2027 – but without urgent action this will not happen.
Target: Within its first six months in power, the new Government will publish a roadmap on how it is going to achieve this existing legal target, and its long-awaited chemical strategy. The plan must include increased funding for the Environment Agency so the watchdog can do its job – and enforce the law.
#2. SEWAGE: Sewage spills will not damage high-priority areas – including bathing spots and nature sites – by 2030
Current situation: Bathing waters and nature sites are being destroyed by sewage spills, but water companies will not be required to clean up all these spaces until 2045.
Target: Untreated sewage will not cause damage to high-priority sites (which are bathing spots, protected nature sites, National Parks and chalk streams) by 2030. Water companies who fail to meet this target will be prosecuted. Nature-based solutions will be used to clean up sewage wherever possible.
#3. WATCHDOG: Regulators will stop water companies destroying the environment in pursuit of profit
Current situation: Water companies have paid their investors healthy dividends while failing to invest enough in their infrastructure to prevent environmental harm. This is partly caused by a disjointed regulatory system that prioritises economic outcomes over the environment.
Target: Within its first year in power, the new Government will publish a plan to reform regulation of water companies. This plan must be legislated on and executed within the first term of Parliament. This will include tougher powers to restrict dividends and bonuses for underperforming water companies, alongside greater resources to pursue prosecution. A “green duty” will be placed on Ofwat, which will force the regulator to place greater emphasis on the environment when making decisions over water companies’ business plans.
#4. BATHING: Create 100 clean bathing spots in rivers by 2030
Current situation: People in the UK have discovered the joy of wild swimming. But there are only 15 official bathing spots in English rivers, and many are not safe.
Target: 100 bathing spots in English rivers by the end of the new parliamentary term. The Environment Agency must start monitoring water quality throughout the year and take action to improve water quality at these sites. Bathing regulations will be altered so polluters can be prosecuted when bathing sites fail water quality tests.
#5. FARMING: Farmers must be funded to improve water quality, and face enforcement action if they damage the environment
Current situation: Agriculture is the biggest source of pollution in many rivers, but many farmers warn they are struggling to make ends meet under post-Brexit farming subsidies. Meanwhile, the Environment Agency is failing to enforce farming water-quality regulations.
Target: Within its first year in power, the new Government will strengthen its Environmental Land Management scheme so farmers are given more grants, support and advice to undertake activities that will improve water quality. The Environment Agency will commit to a year-on-year increase in the number of farms being inspected – and take enforcement action against those who commit breaches of the “farming rules for water”.