MPs issue damning verdict on state of UK's water industry

The "failing" water sector has been left to flounder because “piecemeal regulators appear to be missing in action”, MPs have warned. Water bills are expected to rise at their fastest rate in 20 years at a time when customer trust in the sector is at an all-time low, the Public Accounts Committee (PAC) said.

It described the industry as “failing”, firms as “floundering” and accused "piecemeal" watchdogs of being absent. PAC Chair Sir Geoffrey Clifton-Brown said: “The monumental scale of work required to reverse the fortunes of failing water companies is rivalled only in difficulty by the efforts needed to repair customers' faith in the sector.

“In the face of looming water shortages, steps must be taken immediately if the Government is to set the sector back on the right path. The good news is that our inquiry heard that the quality of our drinking water is some of the best in the world.

“Customers are being expected to shoulder the burden of water companies’ failings, without being told why or on what their money will be spent. The fines imposed for the environmental arms caused by neglected infrastructure must be diverted to fund improvements, and we must know what will happen in the event of company insolvency.”

The MPs said that regulator Ofwat must set clear expectations for companies to explain where customer money is being spent, why bills are rising and what improvements customers can expect for their money within the next six months.

Water bills in England and Wales are set to rise by £123 on average this year.

It comes as Thames Water’s chairman Sir Adrian Montague said the firm is still in crisis mode as it seeks to avoid collapsing into insolvency.

Sir Geoffrey added: “Reports of Thames Water's impending insolvency are deeply concerning. It is past time that we had a low risk, low return water sector, from its current farcical state of overly complex, sometimes unregulated companies, and a culture of excessive dividends and borrowing. There is also a lot to be done in the regulatory sphere, with a pressing need to improve and streamline the existing regulatory regime.

“More must be done to stem the flow of pollution entering our waterways, as it poses a serious risk to human health and continues to degrade the quality of our lakes and rivers.

"However, regulators are overwhelmed by the number of prosecutions and appear unable to deter companies from acting unlawfully.

"Government must act now to strengthen regulators and support their efforts to hold companies to account.”

An Environment Agency spokesman said: “We take our role in protecting environment and regulating the water sector very seriously.

“Our enforcement action has led to over £151 million in fines since 2015 and we are conducting the largest ever criminal investigation into potential widespread non-compliance by water companies at thousands of sewage treatment works.

“We’re also modernising our approach to regulating the water sector, with more regulation and enforcement officers, better data and are on track to carry out 10,000 inspections this year.”

A Water UK spokesman said: “We agree that fundamental change to regulation is needed. By suppressing investment, Ofwat achieved short-term cuts to people’s water bills but at long-term risk to the resilience of our vital water supplies.

"This is finally being put right, with a record £104 billion investment over the next 5-years to secure our water supplies, end sewage entering our rivers and seas and support economic growth. We hope that the recommendations of the Independent Water Commission next week ensure we never again find ourselves in this position again."

An Ofwat spokesman said: “Today's PAC report is another contribution to the debate on the future of the water sector. We are clear that change is needed, and the Independent Water Commission is a key opportunity to help rebuild public trust, which is essential if we are to deliver our vision of a secure and sustainable water sector that acts in the best interests of customers, communities and the environment.

"The 2024 Price Review has unlocked £104bn of investment to upgrade and turn around water companies' environmental record and improve services to customers.

“We have been engaging with the Commission throughout the process, and look forward to the final report’s publication and working with government on the next steps”.