Between 2010 and 2025, several privatised water companies in England and Wales have spent less on infrastructure than permitted under regulatory investment allowances, raising concerns about underinvestment amid rising customer bills and environmental challenges. Data obtained under the UK Freedom of Information Act reveals that a quarter of the sector’s 16 water and sewerage companies underspent their designated capital expenditure over the 15-year period ending recently, despite industry claims that low customer bills constrained infrastructure improvements.

The water regulator Ofwat, which sets price limits and corresponding investment allowances for five-year periods, found that Anglian Water, Northumbrian Water, South Staffordshire Water, and Wessex Water consistently spent below their authorized capital budgets between 2010 and 2025. An additional five companies underspent during at least one regulatory period. This under-expenditure has attracted particular scrutiny amid persistent public dissatisfaction following a series of water outages, sewage discharges, and drought warnings.

While the industry has argued that efforts to keep bills affordable have restricted funding for essential upgrades, customers face significant price hikes in the coming years. Some regions may see increases exceeding 50 percent by 2030 compared with 2025 rates—the steepest rises since the water sector’s privatisation more than three decades ago. The Consumer Council for Water reported that average combined water and sewerage bills in England and Wales have climbed by 373 percent since 1990-91, including inflation.

Experts suggest that underspending may have contributed to higher profit margins for some companies. David Hall, a visiting professor at Greenwich University, noted that water firms have “obvious incentives to underspend” given their potential to enhance returns. For instance, Anglian Water distributed £2.5 billion in dividends from 2015 to 2020 while reportedly underspending its capital allowance by £383 million (in 2013 prices). Anglian Water clarified that these dividend payments included internal transfers related to debt repayment for infrastructure investments that remained within the corporate group.

Similarly, South West Water spent £255 million less than its investment allowance during the same period but paid out £781 million in dividends. The company’s owner, Pennon Group, attributed the underspending to capital and operational efficiencies rather than a lack of upfront investment. Since 2020, water companies have notably increased their expenditure amid heightened public pressure over sewage pollution. According to Ofwat data, all but one firm has fully utilised its 2020–2025 allowance, with four companies exceeding their budgets by over £1 billion each.

A National Audit Office report released last year found that critical performance metrics in the sector had not significantly improved, and some of the recent overspending was driven by rising costs for labor and energy that outpaced inflation. Industry trade body Water UK maintained that water companies have collectively spent 5.8 percent more than their allowances since 2010. Ofwat emphasized the scale of planned investment, approving a record £104 billion programme aimed at strengthening infrastructure, boosting resilience, and enhancing environmental outcomes for rivers and coastal waters.