Ofwat, the UK’s water regulator, is reportedly set to be abolished and replaced by a new body next week. This follows mounting criticism over its handling of sewage companies and the poor performance of major firms, including Thames Water. A consultation on establishing a new regulatory authority is anticipated to be announced after the publication of a review by Sir Jon Cunliffe, former Deputy Governor of the Bank of England.
Official statistics released earlier this week highlighted a 60% increase in serious pollution incidents by water companies in 2024 compared to the previous year. The Environment Agency reported that Thames Water was responsible for nearly half of these incidents, with 33 out of 75 serious pollution events attributed to the company.
The Guardian reported that Thames Water is engaged in discussions with Ofwat regarding a potential takeover by its creditors to avoid fines and penalties. Private equity firm KKR recently withdrew from a deal to acquire an equity stake in Thames Water, leaving the company struggling to prevent temporary nationalisation amidst its financial challenges.
Thames Water continues to grapple with £20 billion in debt, facing significant fines over sewage spills and ongoing shareholder payouts. Sir Adrian Montague, the company’s chair, acknowledged that it would take a decade to turn around its fortunes, following a £1.6 billion loss reported for the year ending March.
Sir Jon Cunliffe’s review is expected to propose substantial structural reforms aimed at addressing long-standing issues in the water sector, including environmental damage, financial instability, and high consumer bills. An interim report has already called for a “fundamental reset” of the industry, indicating that no single change can address the widespread challenges facing water companies. However, public ownership of water is not within the scope of Cunliffe’s review, as directed by the government.
The Public Accounts Committee (PAC) has urged a transformation of the water sector into a “low risk, low return” environment, advocating for enhanced regulatory powers to curb high dividends and unlawful practices. A recent PAC report warned that customer trust is at its lowest in over a decade, driven by poor performance, especially regarding environmental issues.
