Water customers in England and Wales may be owed £163m for sewage spills, corporate wrongdoing researchers claim. Water firms charge customers to treat sewage, but instead have been widely discharging it in to rivers and onto beaches, researchers from Faders said. The firms have not invested enough, leading to an “excessively low-quality service”, the researchers said. However, a water industry body said firms were putting in place a £56bn programme to tackle spills. Water firms have been under pressure to clean up their act after discharging sewage into rivers and the sea 400,000 times in 2020.
The water industry in England and Wales is currently under criminal investigation by regulators Ofwat and the Environment Agency over sewage discharges, and it has opened six enforcement cases against companies. However, the Fideres researchers called for further action over competition concerns, as first reported by the Guardian. Customers do not get to choose their water company – which one they get just depends on where they live. Water firms have an effective monopoly, but are constrained on how much they can charge customers by Ofwat. But the researchers said water firms had still “abused” their position by not investing enough, with investment in wastewater and sewage networks falling over time.
Chris Pike, one of the researchers, said that the firms “face no competitive pressure”, which has led to underinvestment. He pointed to recent research by the Financial Times, which found that water firms had “slashed” investment in critical infrastructure by up to a fifth since they were privatised 30 years ago. Over the same period, the firms borrowed £53bn, but much of that has been used to pay £72bn in dividends to shareholders, not for new investment.
A certain amount of people’s water bills is supposed to go towards cleaning waste water. But due to the spills, “there is a reasonable case to be made under competition law that users may have been overcharged by approximately £163m over the last six years”, the researchers said. They called for an investigation of water firms either by the Competition and Markets Authority (CMA), or by Ofwat. However, industry body Water UK said the research was a “distraction” from the “vital work” of the “transformation to our rivers we all want to see” over the next decade.
“Water and sewerage companies are currently putting in place the largest ever infrastructure programme the industry has ever seen to improve overflows, and tackle spills, at a cost of £56bn,” a spokesperson said. However, the BBC understands that Ofwat’s position is that sewage discharges, particularly ones which close beaches, are not acceptable, which is why it is investigating 2,200 water treatment works in England.
The regulator has also called for urgent action from water firms on sewage discharges caused by storm overflows. Ofwat is also working with other regulators, including the Environment Agency, which is carrying out a criminal investigation in to how firms are complying with environmental permits. The regulator has also taken action against Southern Water which was fined a record £90m in 2021 for deliberately dumping billions of litres of raw sewage into the sea.
