Water companies are facing fines of £157.6 million after key targets for reducing pollution, leaks and supply interruptions were not met. Ofwat has announced the order for water firms due to their failure to meet essential performance targets.
The industry regulator announced that water firms have fallen short on key objectives, including pollution reduction, leak management, and minimising supply interruptions, while customer satisfaction continues to plummet.
According to Ofwat’s annual assessment of water companies, customers can expect a cut in their bills in 2025-26 to reflect these hefty fines, with the total amount of rebates decided in December.
An annual report showed that not a single water company managed to reach the “leading” category set by the regulator. Anglian Water, Welsh Water, and Southern Water fell into the “lagging” group, and the other ten firms are categorised as “average”.
Each year, Ofwat evaluates the performance of water companies in England and Wales against ambitious goals they established in 2019 for a five-year period ending in 2025.
Should the companies fail to hit these marks, Ofwat limits how much they can charge customers. The regulator has noted that these figures are tentative until a full review is completed.
Despite pledges from water companies to slash pollution incidents by 30 per cent, only a 2 per cent reduction has actually been achieved. The firms are increasingly falling behind on crucial benchmarks for pollution control and internal sewer flooding, Ofwat pointed out.
David Black, Ofwat’s chief executive said: “This year’s performance report is stark evidence that money alone will not bring the sustained improvements that customers rightly expect. It is clear that companies need to change and that has to start with addressing issues of culture and leadership.
“Too often we hear that weather, third parties or external factors are blamed for shortcomings. Companies must implement actions now to improve performance, be more dynamic, agile and on the front foot of issues. And not wait until the Government or regulators tell them to act.
“As we look towards the next price control, the challenge for water companies is to match the investment with the changes in company culture and performance that are essential to deliver lasting change.”
Thames Water has improved its performance, moving from “lagging” to “average” after meeting some targets on leakage and supply interruptions. However, the heavily indebted London water provider will still have to pay a hefty £56.8 million fine, the largest for the fourth consecutive year.
Other water companies facing significant fines include Anglian Water at £38.1 million, Yorkshire Water at £36 million, and United Utilities at £33.2 million.
These penalties come on top of an ongoing Ofwat investigation into all 11 water firms in England and Wales, which has already resulted in three companies being ordered to pay £168 million in fines.
The water sector is facing intense public and political scrutiny over issues such as sewage spills, proposed bill increases, and executive bonuses.
England’s rivers, lakes, and oceans have seen a drastic decline in quality due to years of underinvestment by private water companies, aging infrastructure, population growth, and extreme weather events caused by climate change.
Some water utilities are struggling with significant debt, while others face criticism for prioritizing shareholder dividends and executive bonuses.
Labour has called for the industry to reduce spills and proposed new legislation that could result in up to two years’ imprisonment for executives who obstruct regulators.
Steve Reed, Secretary of State for the Environment, Food and Rural Affairs, said: “Our waterways should be a source of national pride, but years of pollution and underinvestment have left them in a perilous state.
“The public deserves better. That’s why we are placing water companies under special measures through the Water Bill, which will strengthen regulation including new powers to ban the payment of bonuses for polluting water bosses and bring criminal charges against persistent law breakers.
“We will be carrying out a full review of the water sector to shape further legislation that will fundamentally transform how our entire water system works and clean up our rivers, lakes and seas for good.”
A recent Environment Agency report revealed that nearly 20 per cent of water supplies are lost through leaks before reaching customers’ taps.
James Wallace, CEO of campaign group River Action, said: “This might sound like a lot of money but frankly it is a drop in the ocean for polluting water companies that have handed billions in dividends and interest payments to investors.
“Clean and abundant water and healthy ecosystems are fundamental to human life and our economy. Yet, water companies continue to pollute the nation’s waterways without facing the full force of the law or sufficient penalties.”
Mike Keil, chief executive of the Consumer Council for Water (CCW), added: “Poor performance on pollution incidents and a failure to protect thousands of households from the misery of sewer flooding will do little to reverse the unprecedented decline in people’s satisfaction and trust in water companies, which is reflected in our research.
“Customers will rightly question why some companies should be trusted with more of their money for future investment, when they are struggling to deliver on their existing commitments.
“People need to see and experience changes which convince them the industry cares as much about the environment as they do.”