Thames Water bills will still increase by 40% in updated business plan

Thames Water has made a fresh bid to hike bills by 40%, promising more spending on environmental projects, but questions still remain on whether it can secure the funding required to deliver it.

The utility will cut day-to-day spending in order to free up another £1.1 billion more to spend on environmental projects over the five years from 2025-2030. That brings total spending over the plan to £19.8 billion.

By cutting spending elsewhere, it will keep bill increases at 40%, rather than the 56% hike that had been feared.

Thames Water’s main day-to-day expenses are staff, maintenance and energy and raw materials. The Standard understands that Thames Water does not plan to cut staff.

It also proposed another £1.9bn of "potential investment" in cutting sewage spills, but if that goes ahead, bills will be £19 higher, hitting £627 by 2029-30.

Chris Weston, CEO of Thames Water said: “Our business plan focuses on our customers’ priorities. As part of the usual ongoing discussions relating to PR24, we’ve now updated it to deliver more projects that will benefit the environment.

“We will continue to discuss this with our regulators and stakeholders.”

Regulator Ofwat will respond to the plan on 12 June, revealing whether it is “minded to” approve it.

Thames Water submitted an earlier plan to Ofwat in October, also including a 40% increase in bills. Alongside that plan, it aimed to raise £750 million from its nine shareholders.

However, shareholders backed out of the fundraise last month, saying that Ofwat would not provide the “necessary regulatory support” for the five-year plan, making it “uninvestable”.

Given the point of difference between Thames shareholders and Ofwat was “regulatory support”, including topics like fines for sewage spills, the questions on whether Thames will get funding are far from certain.

If funding is not provided, Thames could be nationalised, via a special administration regime. Parent company Kemble defaulted on some of its debts last week because of the removal of funding.

Lib Dem MP for Richmond Park Sarah Olney said today that she would table a bill to put Thames Water into Special Administration.

Olney said: “This plan is a farce and the government must now intervene to hold this polluting giant to account.

“That is why I will be tabling a Bill in Parliament today which would immediately put Thames Water into Special Administration and force them to clean up their mess.”

Shareholders of Thames Water declined to comment on the plan.

Gary Carter, national officer of the GMB union, said: “It’s not for hard-up bill payers to dig Thames out of the financial mess they’ve created.

“The shareholders who trouser millions since privatisation must fork out to give the company a chance to turn things round.

“You can’t expect customers to pay £627 a year to pay for the past failures of Thames Water.

“Previous owners have taken the profits in huge dividends rather than putting in the investment needed.”