Singer and former Undertones frontman, Feargal Sharkey on the River Lea in Harpenden, Hertfordshire. He is campaigning to protect England's waterways. Photograph: Richard Saker/The Guardian
Singer and former Undertones frontman, Feargal Sharkey on the River Lea in Harpenden, Hertfordshire. He is campaigning to protect England's waterways. Photograph: Richard Saker/The Guardian
Water bills in England and Wales will rise by an average of £94 over the next five years, under plans set out by the regulator and described by the chancellor as “a bitter pill” for households.
Rachel Reeves said the planned 21% increase to an average of £535 a year reflected “14 years of failure from the Conservatives” amid the sewage pollution scandal and cost of living crisis.
Britain’s water companies have signed up to the government’s initial package of reforms for the sector, the environment secretary Steve Reed said after meeting with executives from 16 companies.
He blamed the previous government for the current mess: “Today’s water bill rises are the result of years of failure.”
The water industry regulator has put Thames Water into unprecedented special measures, allowing extra scrutiny of the struggling water supplier as it faces the prospect of a painful restructuring or temporary nationalisation.
Ofwat said on Thursday that Thames would be placed in a “turnaround oversight regime” and subject to “heightened regulatory” measures, meaning the company must regularly report on the progress of its investment plan. It is the first time a water company has faced such measures.
The regulator made the announcement as it published its draft review on English and Welsh water companies’ business plans and said the proposal submitted by Thames was “unsatisfactory”.
The UK economy returned to growth in May after a washout month in April when activity flatlined, resuming the recovery from last year’s recession.
Figures from the Office for National Statistics (ONS) show gross domestic product rose by 0.4% month on month, double what City economists had forecast, after recording zero growth in April when wet weather hit consumer spending.
In the first week since Labour’s election landslide, the chancellor, Rachel Reeves, has promised to reboot the economy by making it the new government’s “national mission” to secure the highest sustained growth in the G7.
James McCann, deputy chief economist at the investment company abrdn said:
The Fed will enjoy reading the June CPI report. Headline prices fell by 0.1%m/m and core prices increased just 0.1%m/m, both comfortably below expectations. Indeed, this was the weakest monthly core inflation reading in more than three years and suggests the central bank is back on track with regards to hitting its inflation target.
The news was pretty good across the board. Core goods prices were down again, helped by lower autos prices, with deflation in this sector having clearly resumed following a brief halt earlier this year. Otherwise, core services prices were up just 0.1%m/m, helped by much weaker shelter inflation. We of course have been waiting for the moderation in market rents to feed into these official measures and this is a tantalising signal that this might be more definitively playing out. Other services inflation meanwhile was negative for a second consecutive month, with air fares providing another huge contribution to this weakness.
The bump in Q1 inflation is increasingly looking like a blip and the Fed should be increasingly confident that it can start to cut rates. This easing looks increasingly timely as activity and labor market indicators start to slow. Indeed, amid softer price pressures the Fed is likely to start to turn its attention to ensuring that this slide does not turn into a rout.”
Separate US figures showed the number of new jobless claims dipped by 17,000 to 222,000 and continuing claims held stable.
James Knightley, chief international economist at ING, has crunched the inflation figures:
US CPI came in below expectations, which should increase the Fed’s confidence that inflation is on the path to sustainably reaching the 2% target. September rate cut chances are rising and so too is our belief that the Fed will cut rates three times this year rather than by just the two cuts priced by markets…
We are finally seeing housing inflation slow with shelter coming in at 0.2% month on month rather than the 0.4% rate it has been trending at. Owners’ equivalent rent and primary rent were 0.3% MoM, the lowest for three years, while hotel prices fell sharply…
Between now and then [September] we expect to see more evidence of a cooling jobs market and decelerating consumer spending growth. With the Fed keen to avoid a recession and achieve the targeted “soft landing” we think the Jackson Hole Conference at the end of August will be the venue for the Fed to signal more explicitly that interest rate cuts are coming. We continue to see three rate cuts this year versus the market pricing of two.
US inflation falls more than expected to 3%, boosting hopes of rate cuts
US inflation has come in lower than expected, boosting hopes of an interest rate cut in September.
The headline annual inflation rate eased to 3% in June, the lowest in a year, and down from 3.4% in May, according to official figures . Economists had expected inflation to fall to 3.1%.
On a monthly basis, the consumer price index dropped by 0.1% in June from May, versus expectations of a 0.1% rise.
The annual core inflation rate, which strips out energy and food and is closely watched by the US Federal Reserve, dipped to 3.3%. Analysts had expected it to stay at 3.4%.
Water companies sign up to reforms; Reed: bill rises 'result of years of failure'
Britain’s water companies have signed up to the government’s initial package of reforms for the sector, the environment secretary Steve Reed said after meeting with executives from 16 companies.
After meetings with water bosses this afternoon, they have now signed up to my initial package of reforms as we work towards cleaning up our water, prioritising the interests of water customers and the environment, and fixing our broken sewage system.
He also said:
Today’s water bill rises are the result of years of failure.
The new government will force water companies to tackle illegal sewage dumping into our rivers, lakes and seas.
Firm action should have been taken much earlier to ensure money was spent on fixing the sewerage system, not syphoned off for bonuses and dividends.
The decisive steps set out today mean this will never be allowed to happen again.
Steve Reed at cabinet meeting, 9 July. Photograph: Tayfun Salcı/ZUMA Press Wire/REX/Shutterstock
David Henderson, chief executive of the trade association Water UK, said the industry will work with government to implement the reforms rapidly.
We welcome today’s swift action by the Secretary of State. Companies have agreed to his direction that, in addition to turbocharging investment, they put customers and the environment at the core of how they operate.
We will work with government to implement these reforms as quickly as possible and deliver our largest-ever investment plan to secure our water supplies, end sewage in rivers and enable economic growth.
UK energy secretary orders ban on North Sea drilling – report
Ed Miliband has reportedly ordered an immediate ban on new drilling in the North Sea in a move that overrules his own officials and threatens to trigger a wave of legal action.
The new energy secretary has told regulators not to approve a new round of drilling licences that was expected to get the go-ahead in the coming weeks, the Daily Telegraph reported.
His decision means that companies will have wasted millions of pounds putting together their bids, and could take legal action.
The decision followed crisis meetings yesterday between Miliband and his aides after The Telegraph asked for updates on outstanding drilling licence applications.
🔥 "We've had enough of the greed, we've had enough of the exploitation. The rip off, it ends here and it ends today."@Feargal_Sharkey telling it how it is this morning 👇 pic.twitter.com/bB71nlwTAf
Feargal Sharkey: Ofwat shows 'utter disregard for customers and the environment'
Helena Horton
Our environment reporter Helena Horton has spoken to Feargal Sharkey, water campaigner and former Undertones frontman. He said:
This ruling is not particularly impressive if you’re a water customer.
As much as today was a referendum about the water industry’s future, it’s a decision about Ofwat’s future - that’s because it doesn’t have one, as yet again it has demonstrated it has no empathy whatosever for the rage and anger that persists across the nation and they simply continue to treat the environment and customers with utter contempt.
They are allowing water companies to put up bills by a large amount to pay for infrastructure they should have already paid for with customer bills. Customers are therefore having to pay twice.
Sharkey said he is planning to march on parliament in disgust.
I am now so outraged with the contempt Ofwat is showing to customers that we should be taking to the streets outside parliament to show that we will no longer take their greed, their incompetence and their complete and utter disregard for customers and the environment. It is a date yet to be set, but probably late October.
Feargal Sharkey, the former frontman of the Undertone rock band turned clean water campaigner. Photograph: Krisztián Elek/SOPA Images/REX/Shutterstock
Greens call for water companies to be nationalissed
The Green Party has called for water companies to be taken into public ownership. Green MP Siân Berry, the party’s former leader, said:
Once this is done, government can invest affordably in the creaking infrastructure without all the harm falling on to our bills, and into our rivers and oceans that are currently being treated as open sewers.
James Wallace, who runs the campaign group River Action James Wallace said:
These bill hikes punish households struggling with the cost-of-living crisis for the abject failure of greedy water companies to invest in their crumbling infrastructure and reduce record sewage spills.
For decades the industry has put profit before the environment, rewarding its shareholders with billions in dividends, and in the process filling our rivers with human sewage.
We must fix this national embarrassment of systemic sewage pollution which has caused environmental carnage to our rivers.
The singer and clean water campaigner Feargal Sharkey has welcomed this afternoon’s meeting between the environment secretary, Steve Reed, and the chief executives of all water companies in England and Wales, saying on X yesterday:
Now this is when it starts to get really interesting.
Campaigners say bill rises 'unfair;' Ofwat 'turning blind eye to sewage scandal'
Here is more reaction to the £94 average rise in water bills in England and Wales in the next five years, proposed by the regulator Ofwat.
Giles Bristow, chief executive of Surfers Against Sewage, said:
The general election campaign made clear that the public is fed up with those in power turning a blind eye to the sewage scandal.
Unfortunately today’s announcement, in which Ofwat accepts that we will all have to swim and surf in sewage way beyond 2030, does nothing to change that.
Signing off on the continuation of at least 200,000 sewage discharges a year is simply unacceptable and a sign that the regulator still doesn’t comprehend the scale of public fury on this issue.
He called for the new Labour government to launch a public inquiry as the only way to “help us understand how we got here and how we can dig our way out”.
Paul de Zylva, from Friends of the Earth, said the decision on bills and investment “yet again proves that our current form of water privatisation is not fit for purpose”.
It sees water companies pile pressure on Ofwat to allow them to hike customers’ bills to subsidise long-overdue investment in our crumbling sewage infrastructure which might cut or prevent some, but by no means all, pollution.”
While he said Ofwat’s draft determination shows it is not pandering to everything water companies want, many will still see the increase in bills as “unfair”.
He called on the government to provide greater funding for the Environment Agency, which is tasked with regulating the environmental actions of water companies, and put a “green duty” on Ofwat alongside its environmental focus, as well as impose tougher sanctions on “irresponsible” water firms.
Here is Thames Water’s response to today’s Ofwat announcement.
Britain’s biggest water company said it had put forward an “ambitious plan” to Ofwat, asking for £19.8bn of total expenditure to maintain reliable supplies of safe drinking water and to deal with wastewater across London, the Thames Valley and Home Counties.
Within this we put forward record investment to improve infrastructure, meet new environmental standards and reduce river pollution. Our plan will also improve the resilience of our critical infrastructure in the face of challenges such as climate change and population growth.
We believe our plan is ambitious, deliverable, financeable and investible. It is also underpinned by a package to support over 500,000 customers with reduced bills.
Ofwat’s draft determination understandably challenges us on efficiency and delivery. They have been thoughtful in considering the funding we need for our day to day running costs and the improvements our customers and communities want to see.
Although Ofwat currently categorises our business plan as ‘inadequate,’ this judgment rests on over 20 very specific tests around the scope of information to be provided, and evidence required to depart from Ofwat’s own assumptions. Ofwat has made clear it will revisit its view if we provide further evidence to reach a final determination that is, in the round, affordable for customers, deliverable, financeable, as well as investable. We welcome the opportunity to provide Ofwat with further evidence about the need for the investment we plan to make, our costs and how we will deliver it.
Thames said it will respond to Ofwat by 28 August, and the regulator will make a final determination in December.
Thames Water has been discharging sewage from the Amersham Balancing Tanks into the River Misbourne for over 3,500 hours. 9 July Photograph: Maureen McLean/REX/Shutterstock
Pound hits four-month high after GDP data; European shares rise ahead of US inflation
The pound hit a four-month high after the better-than-expected UK GDP figures, which showed the economy grew by 0.4% in May following zero growth in April. Economists say this suggests that in the second quarter it grew at a similar rate to the first quarter’s 0.7%.
Sterling rose by 0.2% to $1.2879.
European shares are rising ahead of the US inflation figures for June, out at lunchtime. The FTSE 100 index is 31 points, or 0.4%, higher at 8,224, with water companies Severn Trent and United Utilities leading the gains, up 3.2% and 2.6% respectively. The German and Italian markets edged 0.16% higher while the French index climbed by 0.5%.
Headline inflation in the US is expected to have eased to 3.1% in June from 3.3% in May, while core inflation, which strips out energy and food, is forecast to have stayed at 3.4%.
In Germany, Europe’s biggest economy, inflation eased to 2.5% in June from 2.8% in May, according to final official figures, leaving the door open for an interest rate cut from the European Central Bank in September.
Russ Mould,investment director at AJ Bell, said:
The new government has placed economic growth at the heart of its policies and it will be pleased to have inherited positive momentum with GDP.
The bigger issue is whether the Bank of England will look at this data and feel less inclined to cut rates. After all, cutting rates is something a central bank does to stimulate a lacklustre economy, not grease the wheels for one already moving ahead. That said, momentum could easily lose pace, particularly if the jobs market weakens and sticky inflation causes consumers to stay cautious on spending.
A stronger pound has traditionally been unfavourable for the FTSE 100 given many of its constituents earn in US dollars. That factor was given a backseat as utilities, miners and big consumer brand companies including Diageo and Unilever helped to push the index higher.
The water industry regulator has put Thames Water into special measures giving it extra scrutiny of the struggling water supplier, as it faces the prospect of a painful restructuring or temporary nationalisation.
Ofwat said today that Thames, Britain’s biggest water company, would be placed in a “turnaround oversight regime” and subject to “heightened regulatory” measures, meaning the company must regularly report on the progress of its investment plan.
The review said Thames customers will face a 22% increase in their bills over the next five years.
Ofwat said Thames would be allowed to increase bills by £99 to £535, £92 less than the company had proposed. Thames, which serves 16 million customers across London and the south-east, had asked the regulator to raise bills by 44% over the next five years.
The price review is seen as crucial for the future of Thames Water, which is creaking under £15.2bn of debt. The company said this week that, after the review, it would approach potential investors this autumn, before Ofwat’s final verdict in December.
Over the next five years, Thames has been tasked with reduce sewage spills by 64%, cutting leaks by 19% and reducing supply interruptions by two-thirds.
The regulator said:
Thames Water faces significant issues and as it seeks to tackle them, our draft determinations will support a major investment programme but also subject the company to new, heightened regulatory measures.
As a result of being put into the regime, Thames will have to provide a “delivery action plan” and regularly report on the progress of its spending programme.
Water companies shares rise after Ofwat announcement
Shares in several water companies have risen and are leading gains on the FTSE 100 index this morning, following the Ofwat announcement that water bills in England and Wales will rise by an average of £94 over the next five years, in plans set out by the regulator.
Severn Trent and United Utilities are the top two risers on the FTSE 100, up by 2.9% and 2.3% respectively. The index rose by 18 points, or 0.2%, overall to 82,12. Germany’s Dax rose by 0.3%, France’s CAC climbed by 0.5% and Italy’s FTSE MiB edged by 0.1% higher.
FTSE 250-listed Pennon Group jumped 6.4% this morning. The Exeter-based utility said its finance chief Steve Buck was stepping down for personal reasons, after nearly a year in the role. He will be succeeded by Laura Flowerdew, a company insider and previously chief financial officer at Bristol Water.
UK environment secretary promises new customer panels to hold water company bosses to account
Ahead of his meeting with the bosses of all 16 water suppliers in England and Wales this afternoon, Steve Reed, the UK environment secretary, announced a series of “initial steps towards ending the crisis in the water sector”.
He has written to Ofwat, asking the water regulator to ensure funding for vital infrastructure investment is ringfenced and can only be spent on upgrades benefiting customers and the environment. He also wants Ofwat to ensure that when money for investment is not spent, companies refund customers, with money never allowed to be diverted for bonuses, dividends or salary increases.
He wants water companies to change their Articles of Association, the rules governing each company, to make the interests of customers and the environment the primary objective.
Consumers will gain new powers to hold water company bosses to account through “powerful new customer panels,” the government said. For the first time in history, customers will have the power to summon board members and hold water executives to account.
Steve Reed at cabinet meeting, 9 July. Photograph: Tayfun Salcı/ZUMA Press Wire/REX/Shutterstock
Strengthened protection and compensation for households and businesses when their basic water services are affected. Subject to consultation, the amount of compensation customers are legally entitled to when key standards are not met will more than double. The payments will also be triggered by a wider set of circumstances including Boil Water Notices.
Reed said:
We will never look the other way while water companies pump sewage into our rivers, lakes and seas.
This unacceptable destruction of our waterways should never have been allowed, but change has now begun so it can never happen again.
Today I have announced significant steps to clean up the water industry to cut sewage pollution, protect customers and attract investment to upgrade its crumbling infrastructure.
That change will take time. Over the coming weeks and months, this government will outline further steps to reform the water sector and restore our rivers, lakes and seas to good health.
Water UK: Ofwat announcement 'biggest ever cut in investment'
Water UK, the trade body for the water industry, said the Ofwat announcement amounts to the “biggest ever cut in investment” in water and sewage infrastructure . A spokesperson said:
If it doesn’t put this right Ofwat will be repeating the mistakes of the past. As a direct result, more housing will be blocked, the recovery of our rivers will be slower and we will fail to deal with the water shortages we know are coming. Water companies proposed to invest £105bn because it is the minimum needed to meet the legitimate concerns we’ve heard from the public about our environment and our economy.
Ofwat is right to want to ensure customers receive value for money and that is why protections are in place to ensure customers only pay for projects that are new, necessary and value for money. But for far too long, Ofwat has failed to be realistic about the levels of investment needed and what it will take to deliver and maintain necessary infrastructure. We cannot allow this pattern to repeat itself. Water companies are ready to invest in an unprecedented overhaul of the country’s water and sewage infrastructure. Ofwat now needs to let them get on with it.
Meanwhile, Alan Lovell, chair of the Environment Agency, hailed Ofwat’s planned 21% average rise in water bills in England and Wales as a “significant step forward in delivering the investment needed to protect rivers and seas, boost water supplies and improve resilience to flooding”.
Water companies have faced sustained criticism over leaky pipes, sewage dumping and extracted dividends in recent years. Lovell said:
It will deliver four times more investment in clean and plentiful water than the previous five-year period.
The critical issue now is delivery. We will be playing our part to make sure the industry steps up on the environment. We are taking forward our biggest ever transformation in the way we regulate, recruiting up to 500 additional staff, increasing compliance checks and quadrupling the number of water company inspections by March next year. Our job is to make sure the water companies do what they say they will do, and people begin to see a difference in their water environment.
Bills will rise for customers of all water companies in England and Wales, apart from those of Wessex Water and Sutton and East Surrey Water.
Mike Keil, chief executive of the Consumer Council for Water, a government-funded body, said:
Millions of people will feel upset and anxious at the prospect of these water bill rises and question the fairness of them given some water companies’ track record of failure and poor service.
Ikley Clean River campaign says Ofwat has gone back on promises
Becky Malby of the Ilkley Clean River Group campaign in west Yorkshire, which wants to secure bathing water status for a river in England, said Ofwat had gone back on its promises.
A year ago, David Black, the CEO at Ofwat wrote to the Ilkey Clean River Group saying “We are firm in our commitment to ensuring that the customer should not pay twice for a company’s shortfall.” In addition he stated that “We are determined to use all the regulatory powers as fully as possible to improve the performance of water companies for customers and the environment.“
Today Ofwat announced a bill rise of £107 BEFORE inflation by 2029/30, for Yorkshire Water customers, amounting to an additional £9 per month + inflation.
Our water system is at breaking point. The additional price increase secures a basic functioning sewage system here at Ilkley and is in direct contradiction to David Black’s promise. We are, after all, being told to pay twice.
People swim in the River Wharfe near Ilkley in Yorkshire, in August 2020. Photograph: Danny Lawson/PA
