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The water industry has warned that firms will be unable to deliver reforms such as stopping sewage outflows without even greater bill rises, with crisis-hit Thames seeking more cash from customers than it originally proposed.

A letter from industry trade association Water UK to Ofwat set a collision course between them as firms covering England and Wales met Wednesday’s deadline to submit their responses to the regulator’s draft decisions on their business plans for 2025-2030.

Ofwat has proposed water bills can only rise an average 21%, much less than firms requested.

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Thames Water said separately on Wednesday that the planned curbs meant it could not attract the fresh investment it desperately needed from investors.

Britain’s biggest supplier had initially sought a 44% rise to bills across the five-year period but was now proposing a 52% increase by 2030.

That could rise to a 59% hike, taking the average annual bill to £696, if it is given extra spending allowances by the regulator.

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It blamed the latest proposed increase on new projections for its customer numbers.

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Water bills to rise by £19

‘Uninvestable’

The industry letter, seen by Sky News, mirrored the sentiment expressed by Thames that Ofwat’s draft determinations were not tenable.

It stated Ofwat’s plans would make it “impossible” for companies to attract the level of investment needed and would reduce the UK’s attractiveness to international investors.

For the industry to be appealing to investors it has said high fines for environmental damage must be lessened and bills hiked even higher. This was echoed in the letter.

Unless Ofwat changes course on the business plans and firms become more investible “companies will not be able to deliver for their customers and the environment or play their role in driving much-needed growth in the economy”, the letter said.

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Water companies face £168m fine

Growth and environmental damage

Economic growth will be constrained and environmental damage will continue unless Ofwat changes its plans, UK Water chief executive David Henderson wrote to David Black CEO of Ofwat.

“Without change, new homes will be blocked, the recovery of our rivers will be slower and we will fail to deal with the water shortages we know are coming.”

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Companies face “the largest ever” cut to investment and “the most punitive targets ever” which will mean there’s not enough money to stop sewage outflows and fix leaky pipes.

“Ofwat’s proposed cuts would delay plans to reduce leaks, sewage discharges and service failures.”

Targets to improve water quality, service and sewage outflows are “increasingly unachievable” and “set the sector (and Ofwat) up to fail”, the letter said.

As some regions face larger cuts than others, Water UK said it would contribute to regional inequalities.

What’s happening with water suppliers?

The industry has faced widespread financial woes, millions in fines for sewage outflows, and creaking infrastructure.

The UK’s largest water supplier Thames Water risks entering a form of government insolvency known as special administration as its parent company has defaulted on debt payments.

The company, which has a debt pile above £15bn, said it had submitted its response to Ofwat’s draft determination,

It described Ofwat’s proposed cap as “not tenable”, adding it rendered its plan as “uninvestible”.

Chief executive Chris Weston said: “We want to deliver a considerable increase in investment in our infrastructure, with total expenditure of £20.7bn in our core plan and a further £3bn through gated mechanisms.”

He added: “The money we’re asking for from customers will be invested in new infrastructure and improving our services for the benefit of households and the environment.

“They are not being asked to pay twice, but to make up for years of focus on keeping bills low.”

Critics accused the water firms of bleeding themselves dry through years of unaffordable dividends. The GMB union was among bodies urging the regulator to hold firm.

Ofwat’s final decision will be published on 19 December.

In response to the letter, an Ofwat spokesperson said: “We expect to receive responses from many organisations, including water companies, customers, environmental and consumer organisations and investors.

“These are likely to reflect a diverse range of views on the proposals we have made. We will consider all of these responses carefully.”

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Gail’s backer plots rare move with bid for steak chain Flat Iron

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Gail's backer plots rare move with bid for steak chain Flat Iron

A backer of Gail’s bakeries is in advanced talks to acquire Flat Iron, one of Britain’s fastest-growing steak restaurant chains.

Sky News has learnt that McWin Capital Partners, which specialises in investments across the “food ecosystem”, has teamed up with TriSpan, another private equity investor, to buy a large stake in Flat Iron.

Restaurant industry sources said McWin would probably take the largest economic interest in Flat Iron if the deal completes.

They added that the two buyers were in exclusive discussions, with a deal possible in approximately a month’s time.

The valuation attached to Flat Iron was unclear on Sunday.

Flat Iron launched in 2012 in London’s Shoreditch and now has roughly 20 sites open.

The chain is solidly profitable, with its latest accounts showing underlying profits of £5.7m in the year to the end of August.

It already has private equity backing in the form of Piper, a leading investor in consumer brands, which injected £10m into the business in 2017.

Flat Iron was founded by Charlie Carroll, who retains an interest in it, but the company is now run by former Byron restaurant boss Tom Byng.

Houlihan Lokey, the investment bank, has been advising Flat Iron on the process.

McWin has reportedly been in talks to take full control of Gail’s while TriSpan’s portfolio has included restaurant operators such as the Vietnamese chain Pho and Rosa’s, a Thai food chain.

A spokesman for McWin declined to comment.

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AA owners line up banks to steer path towards £4.5bn exit

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AA owners line up banks to steer path towards £4.5bn exit

The owners of the AA, Britain’s biggest breakdown recovery service, are lining up bankers to steer a path towards a sale or stock market listing next year which could value the company at well over £4bn.

Sky News has learnt that JP Morgan and Rothschild are in pole position to be appointed to conduct a review of the AA’s strategic options following a recovery in its financial and operating performance.

The AA, which has more than 16 million customers, including 3.3 million individual members, is jointly owned by three private equity firms: Towerbrook Capital Partners, Warburg Pincus and Stonepeak.

Insiders said this weekend that any form of corporate transaction involving the AA was not imminent or likely to take place for at least 12 months.

They added that there was no fixed timetable and that a deal might not take place until after 2026.

Nevertheless, the impending appointment of advisers underlines the renewed confidence its shareholders now have in its prospects, with the business having recorded four consecutive years of customer, revenue and earnings growth.

A strategic review of the AA’s options is likely to encompass an outright sale, listing on the public markets or the disposal of a further minority stake.

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Stonepeak invested £450m into the company in a combination of common and preferred equity, in a transaction which completed in July last year.

That deal was undertaken at an enterprise valuation – comprising the AA’s equity and debt – of approximately £4bn, the shareholders said at the time.

Given the company’s growth and the valuation at which Stonepeak invested, any future transaction would be unlikely to take place with a price of less than £4.5bn, according to bankers.

The AA, which has a large insurance division as well as its roadside recovery operations, remains weighed down by a substantial – albeit declining – debt burden.

Its most recent set of financial results disclosed that it had £1.9bn of net debt, which it is gradually paying down as profitability improves.

AA owners over the years

The company has been through a succession of owners during the last 25 years.

In 1999, it was bought by Centrica, the owner of British Gas, for £1.1bn.

It was then sold five years later to CVC Capital Partners and Permira, two buyout firms, for £1.75bn, and sat under the corporate umbrella Acromas alongside Saga for a decade.

The AA listed on the London Stock Exchange in 2014, but its shares endured a miserable run, being taken private nearly seven years later at little more than 15% of its value on flotation.

Under the ownership of Towerbrook and Warburg Pincus, the company embarked on a long-term transformation plan, recruiting a new leadership team in the form of chairman Rick Haythornthwaite – who also chairs NatWest Group – and chief executive Jakob Pfaudler.

For many years, the AA styled itself as “Britain’s fourth emergency service”, competing with fierce rival the RAC for market share in the breakdown recovery sector.

Founded in 1905 by a quartet of driving enthusiasts, the AA passed 100,000 members in 1934, before reaching the one million mark in 1950.

Last year, it attended 3.5 million breakdowns on Britain’s roads, with 2,700 patrols wearing its uniform.

The company also operates the largest driving school business in the UK under the AA and BSM brands.

In the past, it has explored a sale of its insurance arm, which also has millions of customers, at various points but is not actively doing so now.

By recruiting a third major shareholder last, the AA mirrored a deal struck in 2021 by the RAC.

The RAC’s then owners – CVC Capital Partners and the Singaporean state fund GIC – brought the technology-focused private equity firm, Silver Lake, in as another major investor.

A spokesman for the AA declined to comment on Saturday.

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US-EU trade war fears reignite as Europe strikes back at Trump’s threat

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US-EU trade war fears reignite as Europe strikes back at Trump's threat

Fears of a US-EU trade war have been reignited after Europe refused to back down in the face of fresh threats from Donald Trump.

The word tariff has dominated much of the US president’s second term, and he has repeatedly and freely threatened countries with them.

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This included the so-called “liberation day” last month, where he unleashed tariffs on many of his trade partners.

On Friday, after a period of relative calm which has included striking a deal with the UK, he threatened to impose a 50% tariff on the EU after claiming trade talks with Brussels were “going nowhere”.

The US president has repeatedly taken issue with the EU, going as far as to claim it was created to rip the US off.

However, in the face of the latest hostile rhetoric from Mr Trump’s social media account, the European Commission – which oversees trade for the 27-country bloc – has refused to back down.

EU trade chief Maros Sefcovic said: “EU-US trade is unmatched and must be guided by mutual respect, not threats.

“We stand ready to defend our interests.”

President Donald Trump speaks to reporters after signing executive orders regarding nuclear energy in the Oval Office of the White House, Friday, May 23, 2025, in Washington, as Commerce Secretary Howard Lutnick and Defense Secretary Pete Hegseth listen. (AP Photo/Evan Vucci)
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Donald Trump speaks to reporters in the Oval Office on Friday

Fellow EU leaders and ministers have also held the line after Mr Trump’s comments.

Polish deputy economy minister Michal Baranowski said the tariffs appeared to be a negotiating ploy, with Dutch deputy prime minister Dick Schoof said tariffs “can go up and down”.

French trade minister Laurent Saint-Martin said the latest threats did nothing to help trade talks.

He stressed “de-escalation” was one of the EU’s main aims but warned: “We are ready to respond.”

Mr Sefcovic spoke with US trade representative Jamieson Greer and commerce secretary Howard Lutnick after Mr Trump’s comments.

Mr Trump has previously backed down on a tit-for-tat trade war with China, which saw tariffs soar above 100%.

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Sticking points

Talks between the US and EU have stumbled.

In the past week, Washington sent a list of demands to Brussels – including adopting US food safety standards and removing national digital services taxes, people familiar with the talks told Reuters news agency.

In response, the EU reportedly offered a mutually beneficial deal that could include the bloc potentially buying more liquefied natural gas and soybeans from the US, as well as cooperation on issues such as steel overcapacity, which both sides blame on China.

Stocks tumble as Trump grumbles

Major stock indices tumbled after Mr Trump’s comments, which came as he also threatened to slap US tech giant Apple with a 25% tariff.

The president is adamant that he wants the company’s iPhones to be built in America.

The vast majority of its phones are made in China, and the company has also shifted some production to India.

Shares of Apple ended 3% lower and the dollar sank 1% versus the Japanese yen and the euro rose 0.8% against the dollar.

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