Water firms ordered by Ofwat to pay back customers more than £157m

Published

4 weeks ago

October 8, 2024

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Water firms in England and Wales have been ordered to return £157.6m to customers due to their poor performance.

Ofwat said the money would come off bills for households and businesses in 2025-26, with the total rebates set to be calculated in December.

Last year, the water regulator ordered firms to repay £114m as part of a similar move.

Ofwat said the results of its annual report on water company performance showed “disappointing results” and that money alone was not enough to address the problems facing the industry.

The regulator also warned that firms were “falling further behind on key targets”, with nine out of 11 suppliers experiencing an increase in “pollution incidents” in 2023.

It comes as water bills in England and Wales are set to rise by an average of 21% over the next five years.

Ofwat’s chief executive David 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.”

He added: “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.”

Ofwat’s report also found that while there had been progress made on leaks, firms had only managed a 6% annual reduction – against a target of 16% by 2025.

However, four water companies – South East Water, South West Water, Thames Water and Yorkshire Water – were upgraded by the regulator from “lagging behind” to “average”, but it said performance improvements were inconsistent across the sector.

Anglian Water, Welsh Water and Southern Water were all categorised as “lagging behind”.

No firm managed to achieve the regulator’s top rating of “leading”.

Matthew Topham from We Own It, which is campaigning for the nationalisation of the water industry, said: “Today’s action, while a welcome respite from skyrocketing bills, exposes the Catch-22 at the heart of water privatisation.

“Water firms, which desperately need cash to stay afloat, let alone invest to end sewage pollution, will rightly hand back millions they’ve unfairly taken from the public.

“[But] rather than punishing the shareholders behind these failures, our rivers and seas will suffer from even greater underfunding, and the public from future bill hikes in following years, to cover these costs.”

Earlier this summer, the regulator announced it was investigating all wastewater companies due to concerns that some may not be meeting their obligation to minimise pollution.

In August, Ofwat announced that three firms – Northumbrian Water, Thames Water and Yorkshire Water – were facing a combined fine of £168m for a series of failings, including over sewage treatment.

Last year, industry body Water UK apologised on behalf of firms for “not acting quickly enough” on spills.

Years of under-investment 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.

Environment Secretary Steve 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.

“We will be carrying out a full review of the water sector to shape further legislation that will fundamentally transform how our entire water system works and clean up our rivers, lakes and seas for good.”

Business

Vodafone and Three merger could get green light, says UK’s competition watchdog

Published

3 hours ago

November 5, 2024

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Vodafone and Three merger could get green light, says UK's competition watchdog

A £15bn merger between two of the UK’s biggest mobile networks could get the green light – if they stick to their commitments to invest in the country’s infrastructure, the competition watchdog has said.

The Competition and Markets Authority (CMA) said the merger of Vodafone and Three had “the potential to be pro-competitive for the UK mobile sector”.

Announced last year, the proposed £15bn merger would bring 27 million customers together under a single provider.

The watchdog previously warned that tens of millions of mobile phone users could end up paying more if the merger went ahead.

However, the two groups recently set out plans to protect consumer pricing and boost network investment.

The CMA has now laid out a list of “remedies” required for the deal to go-ahead.

They include the networks committing to freezing certain tariffs and data plans for at least three years to protect customers from short-term price rises in the early years of the network plan.

Stuart McIntosh, chair of the inquiry group leading the investigation, said on Tuesday: “We believe this deal has the potential to be pro-competitive for the UK mobile sector if our concerns are addressed.

“Our provisional view is that binding commitments combined with short-term protections for consumers and wholesale providers would address our concerns while preserving the benefits of this merger.

“A legally binding network commitment would boost competition in the longer term and the additional measures would protect consumers and wholesale customers while the network upgrades are being rolled out.”

Today’s announcement is provisional, with a final decision due before 7 December. The inquiry group is inviting feedback on today’s announcement by 5pm on 12 November.

The CMA also published a list of potential solutions – which it called remedies – to issues it identified with the merger.

If the networks want the merger to go ahead, the watchdog requires Vodafone and Three to:

• Deliver a joint network plan to set out network upgrades and improvements over eight years;

• Commit to keeping certain existing tariff costs and data plans for at least three years to protect customers from price hikes;

• Commit to pre-agreed prices and contract terms so Mobile Virtual Network Operators (MVNOs) – mobile providers that do not own the networks they operate on – can obtain competitive wholesale deals.

Vodafone and Three are two of the biggest mobile firms in the UK, and their networks support a number of MVNOs including Asda Mobile, Lebara, Voxi, and Smarty.

Responding to the watchdog’s announcement, a spokesperson for Vodafone on behalf of the merger said: “The merger will be a catalyst for positive change.

“It will bring significant benefits to businesses and consumers throughout the UK, and it will bring advanced 5G to every school and hospital across the country.

“The merger is also closely aligned with the government’s mission to drive growth and to encourage more private investment in the UK.”

Earlier this year, Three’s chief executive hit out at the UK’s “abysmal” 5G speeds and availability as he urged regulators to approve the company’s merger with Vodafone.

Robert Finnegan noted his firm’s “cash flows have been negative since 2020 and our costs have almost doubled in five years, meaning investment in [the] network is unsustainable”.

“UK mobile networks rank an abysmal 22nd out of 25 in Europe on 5G speeds and availability, with the dysfunctional structure of the market denying us the ability to invest sustainably to fix this situation,” he added.

Business

Bosses rail at business secretary over ‘avalanche of costs’

Published

18 hours ago

November 4, 2024

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Bosses rail at business secretary over 'avalanche of costs'

Business leaders expressed frustration with ministers on Monday amid a growing budget backlash that bosses said would trigger an “avalanche of costs” and leave them with no choice but to slash investment and increase prices.

Sky News has learnt that bosses of large retail and hospitality companies and trade associations told Jonathan Reynolds, the business secretary, that last week’s budget risked damaging consumer confidence and exacerbating challenges facing the UK economy.

Among the dozens of companies represented on the call are said to have been Burger King UK, Fuller Smith & Turner, Greene King, Kingfisher and the supermarket chain Morrisons.

Mr Reynolds is said to have acknowledged that Rachel Reeves‘s inaugural fiscal statement had “asked a lot” of British business, with James Murray, the financial secretary to the Treasury, understood to have described it as “a once-in-a-generation budget”, according to several people briefed on the call.

One insider said that Nick Mackenzie, the chief executive of Greene King, had highlighted that the increase in employers’ national insurance (NI) contributions would cause “a £20m shock” to the company, while Fullers is understood to have warned that it would be forced to halve annual investment from £60m to £30m as a result of increased cost pressures.

Rami Baitieh, the Morrisons chief executive, told Mr Reynolds that the budget had exacerbated “an avalanche of costs” for businesses next year, and asked what the government could do to mitigate them.

Sources added that the CBI, the employers’ group, said its impact would be “severe”, while the British Beer & Pub Association added that there was now a disincentive to invest and flagged “a tsunami” of higher costs.

The range of comments on the call with ministers underlines the scale of discontent in the private sector about Labour’s first budget for nearly 15 years.

Only a small number of interventions during the discussion are said to have been in support of measures announced last week, with the Federation of Small Businesses understood to have praised the doubling of the employment allowance, which would see many of the smallest employers having their NI bills cut by £2,000.

The Department for Business and Trade has been contacted for comment, while none of the companies contacted by Sky News would comment.

Business

Retail giants face food price hikes dilemma after budget

Published

22 hours ago

November 4, 2024

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Retail giants face food price hikes dilemma after budget

Two of Britain’s biggest food retailers will this week face pressure to publicly disclose whether they expect a fresh spike in prices next year as the industry grapples with huge tax hikes imposed in last week’s budget.

Sky News understands that Marks & Spencer (M&S), which will unveil half-year earnings on Wednesday, and J Sainsbury, which reports interim results the following day, are collectively facing an additional bill of close to £200m as a result of changes to employers’ national insurance contributions (NICs) announced by Rachel Reeves, the chancellor.

Industry sources said the pressure on pricing would be “intense” given the thin margins on which the big supermarkets already operate.

“Food price increases from next April are inevitable,” said one.

The warning comes a day after Ms Reeves told Sky News that “businesses will now have to make a choice, whether they will absorb that through efficiency and productivity gains, whether it will be through lower profits or perhaps through lower wage growth”.

Pointedly, she did not highlight the prospect of higher prices at the tills, with some retailers now weighing whether to explicitly blame the government for impending price increases – a move which will trigger renewed inflation in the UK economy.

The grocery industry is expected to be among the hardest-hit by the changes to employer NICs, particularly after the chancellor slashed the threshold at which businesses become liable for it to just £5,000.

Tens of thousands of people employed part-time in the sector earn between that sum and the current threshold of £9,100.

The first major retailer to report financial results since the budget will be Primark’s parent, Associated British Foods (ABF), on Tuesday.

Insiders downplayed the risks of price hikes from Primark given its track record of absorbing inflationary pressures without passing them on to consumers.

ABF’s additional employer NICs bill is expected to be in the region of £25m, according to one analyst.

Overall, the retail sector could end up paying billions of pounds of additional tax given the scale of its workforce.

Ms Reeves has vowed to raise £25bn extra annually from the changes to employer NICs.

In addition to that, the rise in the national living wage will add a further burden to the financial pressures facing the retail industry.

Prior to the budget, Stuart Machin, the M&S chief executive, urged the chancellor not to increase taxes on it, calling them “a short-term, easy fix”.

“When I hear about plans to increase national insurance, a tax with no link to profit which hits bigger employers like us and our smaller suppliers, I’m concerned.

“The chancellor was right in the past to call national insurance a tax on workers.”

Jonathan Reynolds, the business secretary, will hold talks with British business leaders later on Monday about the impact of the budget.

A number of executives will be given the opportunity to ask questions on a call in which more than 100 companies are expected to be represented, although one boss who is critical of many of the budget measures said they were likely to be prevented from voicing their concerns publicly on the call.

ABF, M&S and Sainsbury’s all declined to comment.