A group of influential MPs have called for a “low risk, low return” water sector and urged the government to strengthen regulatory powers amid scrutiny over excessive dividends and murky company structures.
In a wide-reaching report, the Public Accounts Committee (PAC) warned that the “financial fragility” of a few large utilities had caused investors to lose confidence in regulation and the sector as a whole.
Ten companies did not generate enough income in 2023/24 to cover the interest on their debt, the PAC said, while three are now barred from paying out dividends without the industry watchdog Ofwat’s permission.
Geoffrey Clifton-Brown, chair of the committe, urged the government to “act now” to strengthen overwhelmed regulators, which have so far been “unable to deter companies from acting unlawfully.”
Scrutiny of the water industry has mounted in recent years after pollution incidents reached record levels and companies hiked bills to cover a 300 per cent increase in infrastructure spending over the next half decade.
“Customer trust is at the lowest level in more than a decade driven by poor company performance, particularly on the environment,” the PAC warned, adding UK utilities had not given enough clarity over how the extra cash from billpayers would be spent.
It comes amid an ongoing crisis at the UK’s largest water supplier, Thames Water, which is battling to stave off temporary nationalisation after racking up debts of at least £16bn.
The PAC said Ofwat and the Department for Environment, Food and Rural Affairs (Defra) had “not been clear” on what might happen under a so-called special administration regime (SAR), including the potential cost for millions of customers.
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