Water companies must return £157.6m to customers over poor performance

Not one company has achieved the regulator’s top category, while three are in the lowest category of ‘lagging’

Thames Water was rated as ‘average’ in the industry regulator’s annual review (PA)

Water companies will have to pay a £157.6m penalty after missing key targets on reducing pollution, leaks and supply interruptions while customer satisfaction continues to fall, Ofwat has said.

Not one company achieved the regulator’s top category of “leading” while Anglian Water, Welsh Water and Southern Water fell into the lowest category of “lagging” while the remaining 10 were rated “average”.

Ofwat chief executive David Black warned companies that a culture shift was required, as “money alone” would not solve the issue.

The industry regulator announced the rebate following its annual review of water and wastewater companies’ performance in England and Wales, which judges their performance each year against the “stretching” targets they set in 2019 for a five-year period until 2025.

Companies must pay a £157.6m penalty for missing key targets (PA)

If they fail to meet these, Ofwat will restrict the amount of money they can take from customers. Ofwat said the figures are provisional until it completes a review process.

It comes against a backdrop of mounting public and political fury at the privatised water sector which is under fire over sewage spills, proposed bill rises and executive bonuses.

Mr Black said: “This year’s performance report is stark evidence that money alone will not bring the sustained improvements that customers rightly expect.

“It is clear that companies need to change and that has to start with addressing issues of culture and leadership. Too often we hear that weather, third parties or external factors are blamed for shortcomings.

“Companies must implement actions now to improve performance, be more dynamic, agile and on the front foot of issues. And not wait until the government or regulators tell them to act.

“As we look towards the next price control, the challenge for water companies is to match the investment with the changes in company culture and performance that are essential to deliver lasting change.”

Ofwat has said there needs to be a change in culture at water companies (PA)

Labour has said it wants the sector to reduce spills and has even proposed sweeping new laws which could see bosses face up to two years in jail if they obstruct regulators.

The new Water (Special Measures) Bill is designed to lend further credence to regulators so they can take on water companies, with environment secretary Steve Reed adding that a “full review” of the water sector would take place.

In a statement on Tuesday, Mr Reed said: “Our waterways should be a source of national pride, but years of pollution and underinvestment have left them in a perilous state.

“The public deserves better. That’s why we are placing water companies under special measures through the Water Bill, which will strengthen regulation – including new powers to ban the payment of bonuses for polluting water bosses and bring criminal charges against persistent law breakers.”

Years of underinvestment by privately run firms combined with ageing water infrastructure, a growing population and more extreme weather caused by climate change have seen the quality of England’s rivers, lakes and oceans plummet in recent years.

Some water utilities are also creaking under high levels of debt or face criticism over dividends to shareholders and executive bonuses.

James Wallace, CEO of campaign group River Action, said: “This might sound like a lot of money but frankly it is a drop in the ocean for polluting water companies that have handed billions in dividends and interest payments to investors.

“Clean and abundant water and healthy ecosystems are fundamental to human life and our economy.

“Yet, water companies continue to pollute the nation’s waterways without facing the full force of the law or sufficient penalties.”