New UK water regulation changes from April require water companies to invest heavily in infrastructure upgrades to improve water quality, reduce leakage, and manage storm overflows, meaning much higher bills for businesses and homes.

The government believes that this investment is crucial to ensure reliable water supply while also protecting the environment in the face of climate change.

Average bill changes for businesses

The industry regular Ofwat has advised that over the next 5 years, there will be an average increase of 42% on wholesale prices. It is likely that this will be front-loaded, with more increases at the start and tailing off at the end of the period. (1)

Water companies will also be financially incentivised to reduce overall non-household water consumption helped through a significant roll-out of smart meters.

Water sector Investment is set to quadruple – nearly 90% of this will go to meet new requirements set out by the Environment Agency, Natural Resources Wales and the Drinking Water Inspectorate. Water regulator Ofwat has approved England and Wales water companies’ combined £104bn investment plans.

Almost £12bn will be allocated to cutting spills from storm overflows by 45% by 2030, from 2021 levels – more than £6.5m investment per day. There is also £2bn development funding to kickstart £50bn investment for the biggest programme of water supply projects in decades. (2)

In total, 30 major infrastructure projects will build greater resilience to drought by providing enough water to meet the daily needs of around a third of England and Wales’s population. There is a claw-back mechanism to ensure that money not spent on investment by companies is returned to customers through lower bills.

Improving water supplies

UK water regulation changes aim to improve water supply by focusing on reducing leakage, increasing water efficiency through smart meters and  building new infrastructure like reservoirs. Water companies are also tasked with implementing water transfer schemes and exploring alternative sources like desalination.

Managements will be held more accountable for performance through stricter penalties and linking executive bonuses to environmental performance. Ofwat and the Environment Agency will also have increased powers to penalise water companies for non-compliance with environmental standards and leakage targets, pushing them to improve their operations.

Key focuses for water

• Increased investment in infrastructure: New regulations are pushing water companies to invest more in upgrading aging pipes, building new reservoirs, and improving sewage systems, leading to higher costs passed on to customers through increased bills. 

• ·Stricter environmental standards: Regulations are becoming more stringent regarding wastewater discharge and pollution, forcing companies to implement new technologies and practices to comply, which will also contribute to higher bills. 

• Focus on leak reduction: Efforts to identify and fix leaks in the water network are being prioritised, requiring significant investment and potentially leading to higher bills in the short term, although this could be offset by long-term water savings. 

• Climate change adaptation: Investments to address the impacts of climate change, such as building resilience against droughts and extreme weather events, will likely be reflected in higher water bills. 

• Demand management: Promoting water efficiency measures like smart meters to identify and fix leaks, encouraging water-saving practices among consumers, and implementing targeted water usage campaigns. 

• Catchment-based approach: Integrating water management strategies with local ecosystems and communities to address water quality and supply issues at a regional level. 

Higher bills could provide three main potential benefits:

1. Improved water security: By tackling leakage and diversifying water sources, the UK can better prepare for future droughts and climate change impacts on water availability. 

2. Reduced environmental impact: Stricter regulations on wastewater discharge will contribute to cleaner rivers and improved water quality. 

3. Greater customer engagement: Increased transparency of water company performance, and customer engagement in water conservation initiatives. 

Water companies viewpoint

The water sector has cautiously accepted Ofwat’s decisions. A Water UK spokesperson said: “After a decade of cuts Ofwat has finally listened to public anger and agreed a much-needed quadrupling of investment in our aging infrastructure.

“This will be the largest amount of money ever spent on the natural environment, and will help to support economic growth, build more homes, secure our water supplies and end sewage entering our rivers and seas. Each water company will now need to take time to assess what Ofwat’s decision means for them.” (3)

What businesses can do to reduce water costs

SaveMoneyCutCarbon’s view is that water companies will be putting forward significant programmes to manage demand over the coming years. This is likely to include:

• a widespread shift to smart metering

• installing water efficient fittings and appliances

• communicating with customers on the importance of using water wisely and exploring alternative tariff structures to put incentives in place to reduce usage.

To stay ahead of rising costs and fully understand the impact of price increases on your business, SaveMoneyCutCarbon recommends adopting strategies to monitor water consumption and reduce waste. By gaining clear insights into usage patterns, businesses can make informed decisions and plan effectively for the future. SaveMoneyCutCarbon supports this process in two key ways:

1 Water Saving Audit

A water saving audit looks at how a business consumes and wastes water, and what activities can be done to reduce or prevent waste. A site assessment can provide the detailed information to create a report that would include project proposals for suggested repairs and upgrades.

Part of the audit would involve a technician installing immediate  ‘quick fix’ water-saving products, which could be low-flow taps and toilets and low-flow showers – with the savings potentially covering audit costs.

2 Automated Measuring and monitoring

Comprehensive water efficiency can be achieved through automated water measurement technology that enables businesses to analyse water consumption in real-time and gain insight into water consumption profiles through data-driven analysis.

A smart water system would collect data and ensure ongoing monitoring of main and sub-meters. Consumption and leakage data could be stored and analysed through a dedicated water analytics platform.

Bibliography

1 “Understanding Wholesaler price changes in England for 2025/2026” (Accessed March 2025) https://www.water-plus.co.uk/news/20252026-wholesaler-price-changes/

2 “Ofwat approves £104bn upgrade to accelerate delivery of cleaner rivers and seas and secure long-term drinking water supplies for customers” (Accessed March 2025) https://www.ofwat.gov.uk/ofwat-approves-104bn-upgrade-to-accelerate-delivery-of-cleaner-rivers-and-seas-and-secure-long-term-drinking-water-supplies-for-customers/

3 “Ofwat approves £104bn AMP8 investment to enhance England and Wales water infrastructure” (Accessed March 2025) https://www.newcivilengineer.com/latest/ofwat-approves-104bn-amp8-investment-to-enhance-england-and-wales-water-infrastructure-19-12-2024/