People are “right to be angry” at water companies over sewage spills but bills need to be increased by more in order to stop leaks, the boss of the industry body has said.
“We have a system that’s tired and it’s old,” David Henderson, chief executive of Water UK, told the BBC, as firms warned a proposed cap limiting bill rises would hamper improvements.
In July, regulator Ofwat proposed an average £19 a year ceiling on water bill rises, with a final decision due in December.
But Water UK has argued the increase is not enough and would create a “material risk” that companies would not be able to raise enough investment to stop sewage spills.
Water firms have faced a fierce backlash over sewage discharges and leaks in recent years. Critics have also said companies have historically neglected investment in favour of paying executive bonuses and shareholder dividends.
Mr Henderson told the BBC’s Today programme that “people are angry and they’re right to be angry”.
But he warned the UK had a “system that’s tired and it’s old” and said water bills needed to rise higher than the average of £19 a year proposed.
“If Ofwat doesn’t change its proposal then investors may not stump up the money that we need,” Mr Henderson said.
“No rational investor is going to put their money into water right now.”
Ofwat has proposed a water bill increase limit as part of its draft decision on the business plans of water companies from 2025 to 2030.
The proposed increase is a third less than the amount requested by water firms, who argue companies must be able to charge more in order to spend money on fixing leaks.
Mr Henderson rejected the idea that the amount paid out in dividends to investors in recent years was part of the reason there was not enough money for companies to invest, rather than just bills being lower.
He said returns were set by the regulator Ofwat, adding: “If you want investors to put their money into the UK they need to receive a return.
“We’ve been calling for investment for well over a decade and every five years Ofwat has denied the industry sufficient funds to invest as we need.”
He said without more investment, building projects such as hospitals and housing developments would potentially not be built.
‘Absolute balderdash’
The GMB Union called the claims from water companies “absolute balderdash”.
“Water companies have had the money, failed to invest in plugging leaks and preventing sewage spills and now want more money to do what they failed to do,” said Gary Carter, GMB’s national officer.
“It’s time the shareholders paid for the investment the water companies promised but hasn’t delivered.”
An Ofwat spokesperson told the BBC it would carefully consider all responses to its proposals, which are required by midday on Wednesday.
“We expect to receive responses from many organisations, including water companies, customers, environmental and consumer organisations and investors,” they said.
“These are likely to reflect a diverse range of views on the proposals we have made.”
Raw sewage spills into England’s rivers and the sea by water companies more than doubled last year.
A BBC investigation earlier this year revealed sewage had potentially been released illegally 6,000 times in 2022 by England’s water companies in breach of their permits.
Thames Water, along with Yorkshire Water and Northumbrian Water face a total of £168m in fines from the regulator for a “failure” to stop years of leaks.
Ofwat has suggested a ban on director bonuses until leaks and sewage spills are dealt with.
Thames, the UK’s largest water company, has already seen its shareholders abandon plans to invest more money, plunging it into a financial crisis.