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Millions of households across England and Wales are set to face higher water bills after the industry regulator approved an additional £3.4 billion in spending for water companies.
Ofwat announced on Thursday that 13 water firms had requested an extra £4.3 billion for projects linked to housing growth, datacentre developments, drinking water improvements and essential infrastructure upgrades. The regulator approved £3.4 billion of the request.
The new funding comes on top of a £104 billion investment programme already approved for the period between 2025 and 2030, which had previously led to forecasts of water bills rising by an average of 36 per cent by the end of the decade.
According to Ofwat, £1.2 billion of the extra funding will be used to protect and improve water services and infrastructure, while £477 million will help support new housing developments and the expansion of datacentres.
Five major water companies — Southern Water, Thames Water, Severn Trent, Wessex Water and South East Water — will be allowed to increase customer bills earlier than originally planned to help cover the additional costs. Other companies will recover the costs through bills in the 2030s.
The decision comes as the Government pushes forward with plans to build 1.5 million new homes and expand AI-powered datacentres across the UK, both of which are expected to increase demand for water resources.
Ofwat also approved an additional £34 million to help reduce harmful chemicals in water supplies and improve drinking water quality. The move follows recent concerns about pollution in rivers, lakes and other water bodies across England.
Helen Campbell, Ofwat’s Executive Director for Delivery, said the extra funding would help deliver critical projects without delays.
“The newly agreed funding will help unlock much-needed new housing development and boost business growth across a range of sectors, as well as improving drinking water quality and the removal of PFAS and forever chemicals,” she said.
She added that Ofwat would closely monitor companies to ensure the money delivers benefits for customers and the environment, warning that funding could be recovered if targets are not met.
The additional spending is expected to place further pressure on household budgets. Southern Water customers are expected to see the largest impact, with a further £80 added to bills. Thames Water and Severn Trent customers could pay an extra £8, Wessex Water customers £11, and South East Water customers £1 more.
Environment Secretary Angela Eagle acknowledged public concerns over rising costs, blaming years of underinvestment and weak regulation.
“I know that households across the country are watching every pound and I share their frustration,” she said.
The Government says reforms are planned to improve the water sector, keep bills as low as possible and ensure investment is directed towards improving infrastructure and environmental standards.
