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The system for regulating water companies in England and Wales should be overhauled and replaced with one single body in England and another in Wales, a once-in-a-generation review of the sector has advised.

The report, which includes 88 recommendations, suggests a new single integrated regulator to replace existing water watchdogs, mandatory water metering, and a social tariff for vulnerable customers.

The ability to block companies being taken over and the creation of eight new regional water authorities, with another for all of Wales to deliver local priorities, has also been suggested.

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The review, the largest into the water industry since privatisation in the 1980s, was undertaken by Sir Jon Cunliffe, a career civil servant and former deputy governor of the Bank of England who oversaw the biggest clean-up of Britain’s banking system in the wake of the financial crash.

The government confirmed at a news conference on Monday that Ofwat will be abolished as part of an overhaul of a “broken” water regulation system.

Environmentalist Feargal Sharkey told Sky News, “we were promised champagne, what we got was a glass of sour milk”.

File pic: iStock
Image:
File pic: iStock

Sir Jon was coaxed out of retirement by Environment Secretary Steve Reed to lead the Independent Water Commission.

Final recommendations of the commission have been published on Monday morning to clean up the sector and improve public confidence, as bills rise 36% over the next five years. Here are its nine key recommendations:

• Single integrated water regulators – a single water regulator in England and a single water regulator in Wales. In England, this would replace Ofwat, the Drinking Water Inspectorate and water-environment related functions from the Environment Agency and Natural England. In Wales, Ofwat’s economic responsibilities would be integrated into Natural Resources Wales.

It’s hoped this will solve the “fragmented and overlapping” regulation, and more stable regulation will improve investor confidence. Communications regulator Ofcom was given as an example of how combining five existing regulators into one worked.

• Eight new regional water system planning authorities in England and one national authority in Wales to be responsible for water investment plans reflecting local priorities and streamlining the planning processes.

The new authorities would be independent, made up of representatives from local councils, public health officials, environmental advocates, agricultural voices and consumers. The aim is they could direct funding and ensure accountability from all sectors impacting water.

• Greater consumer protection – this includes upgrading the consumer body Consumer Council for Water, into an Ombudsman for Water to give stronger protection to customers and a clearer route to resolving complaints. Advocacy duties are to be transferred to Citizens Advice.

• Stronger environmental regulation, including compulsory water meters. Also proposed by Sir Jon are changes to wholesale tariffs for industrial users and greater water reuse and rainwater harvesting schemes. A new long-term, legally binding target for the water environment was suggested.

• Oversight of companies via the ability to block changes in ownership of water businesses when they are not seen to be prioritising the long-term interests of the company and its customers, and the addition of “public benefit” clauses in water company licences.

To boost company financial resilience, as the UK’s biggest provider, Thames Water struggles to remain in private ownership, the commission has recommended minimum financial requirements, like banks are subject to. This could mean utilities hold a certain amount of cash. It’s hoped this will, in turn, make companies more appealing to potential investors.

• The public health element of water has been recognised, and senior public health representation has been recommended for regional water planning authorities, as have new laws to address pollutants like forever chemicals and microplastics.

• Fundamental reset of economic regulation – including changes to ensure companies are investing in and maintaining assets to help attract long-term, low-risk investment. A “supervisory” approach has been recommended to intervene before things like pollution occur, rather than penalising the businesses after the event.

• Clear strategic direction – a long-term, 25-year national water strategy should be published by the UK and Welsh governments, with ministerial priorities given to water firms every five years.

• Infrastructure and asset health reforms – companies should also be required to map and assess their assets and resilience.

Nationalisation of the water industry was not in the Independent Water Commission’s terms of reference and so was not considered.

Sir Jon said the report has “tried to attack the problem from all sides”.

He warned that bills are going to rise by 30% over the next five years.

“There are some inescapable facts here,” he said.

“The cost of producing water and dealing with our wastewater is going up.”

How has the report been received?

In a speech responding to Sir Jon’s report, Mr Reed said he was abolishing Ofwat.

The water industry lobby group Water UK said “fundamental change has been long overdue”.

“These recommendations should establish the foundations to secure our water supplies, support economic growth and end sewage entering our rivers and seas,” a spokesperson said.

“The Independent Water Commission has written a comprehensive, detailed review of the whole sector, with many wide-ranging and ambitious recommendations.

“Crucially, it is now up to government to decide which recommendations it will adopt, and in what way, but the commission’s work marks a significant step forward.”

Ofwat to be swept away on tide of public anger


Paul Kelso

Paul Kelso

Business and economics correspondent

@pkelso

Sir Jon Cunliffe’s review of the water sector is comprehensive, clear-eyed, and about as radical as allowed by terms of reference that explicitly ruled out renationalisation of England’s private water and sewage companies.

With that key demand of many campaigners off the table, the former Bank of England governor has focused on more effective regulation and securing a better deal for consumers and the investors without whom the industry will sink.

So Ofwat, the embattled current regulator, is to be swept away on the tide of public anger at sewage outflows and shareholder dividends, and the disgruntlement of all its stakeholders.

Having succeeded in its primary aim of keeping consumer bills down, it is now a victim of the consequences: a shortage of investment in infrastructure and a failure to apply similar rigour to shareholder dividends and executive pay.

While campaigners and customers say it has failed to hold companies to account, the companies complain they are too tightly controlled to attract investment.

Ofwat privately points out it can only apply the powers and political direction it is given – but the new government, going with the flow of angry voters, will not hesitate to pull the chain.

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Campaign group Surfers Against Sewage said the report “utterly fails to prioritise public benefit over private profit”.

“This is not transformational reform, this is putting lipstick on a pig - and you can bet the champagne is flowing in water company boardrooms across the land,” said its chief executive, Giles Bristow.

“Only one path forward remains: a full, systemic transformation that ends the ruthless pursuit of profit and puts the public good at the heart of our water services,” he said.

“We welcome Sir Jon’s calls for a national strategy, enshrining public health objectives in law and regional water planning. But we won’t be taken for fools - abolishing Ofwat and replacing it with a shinier regulator won’t stop sewage dumping or profiteering if the finance and ownership structures stay the same.”

Environmentalist Feargal Sharkey told Sky News, “we were promised champagne, what we got was a glass of sour milk”.

The regulator Ofwat said, it will now work with the government and the other regulators to form the new regulatory body in England, and “to contribute to discussions on the options for Wales set out in the report”.

“In advance of the creation of the new body, we will continue to work hard within our powers to protect customers and the environment and to discharge our responsibilities under the current regulatory framework. We will also work collaboratively with all our stakeholders to ensure a smooth transition.”

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Lloyds Bank’s Charlie Nunn expects two more interest rate cuts in 2025

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Lloyds Bank's Charlie Nunn expects two more interest rate cuts in 2025

The head of the UK’s biggest mortgage lender has said he expects two more interest rate cuts this year, making borrowing cheaper.

Chief executive of Lloyds Banking Group Charlie Nunn told Sky News he expected the Bank of England to make the cuts two more times before 2026, likely bringing the base interest rate to 3.75%.

Two cuts are currently anticipated by investors, the first of which is due to be a 0.25 percentage point reduction next month.

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The banking group owns Halifax and Bank of Scotland, making it the biggest provider of mortgages.

Mr Nunn also forecast house price growth of between 2 and 3%.

“We helped 34,000 first-time buyers in the first half [of the year] alone, 64,000 last year. And of course, it was driven by the stamp duty changes in Q1 [the first three months of the year]. So Q2 [the second three months] was a bit slower, but we continue to see real strength in customers wanting to buy homes and take mortgages. So we think that will continue,” he said.

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Expect two more rate cuts this year, says Lloyds boss

It comes as the bank reported higher profits than City of London analysts had expected.

Half-yearly profit at the lender reached £3.5bn as people borrowed and deposited more.

The bank has benefited from high interest rates, set at 4.25% by the Bank of England to control inflation, which have made borrowing more expensive for households and businesses.

Over the last six months, the difference between what Lloyds earns on loans and what it pays out rose.

Mr Nunn told Sky News the profits were due to increased market share in mortgages and small business lending, as well as productivity improvements.

Despite this, Mr Nunn warned the chancellor against raising taxes on financial services, saying it was one of the highest taxed in the world.

Chancellor Rachel Reeves is expected to announce tax rises in the autumn as her vow to bring down debt has come under pressure due to the rising cost of borrowing and government spending U-turns.

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AO chair Cooper interviewed for Channel 4 chair job

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AO chair Cooper interviewed for Channel 4 chair job

The chairman of AO, the online electrical goods retailer, has been interviewed to become the next chair of state-owned broadcaster Channel 4.

Sky News has learnt that Geoff Cooper, a former boss of the builders’ merchant Travis Perkins, is among the candidates in the running to take on the post in the coming months.

Whitehall insiders said that Mr Cooper was now one of the shortlisted contenders awaiting news of whether they would get the nod from Ofcom, the media regulator and culture secretary Lisa Nandy.

In recent weeks, Sky News has revealed that those vying to replace Sir Ian Cheshire include Justin King, the former J Sainsbury boss; Wol Kolade, a private equity executive who has donated substantial sums of money to the Conservative Party; Debbie Wosskow, a start-up founder who already sits on the Channel 4 board.

Simon Dingemans, a former Goldman Sachs banker who sits on the board of WPP, the marketing services group, has also been shortlisted, according to the Financial Times.

Sir Ian stepped down earlier this year after just one term, having presided over a successful attempt to thwart privatisation by the last Tory government.

He was replaced on an interim basis by Dawn Airey, the media industry executive who has occupied top jobs at companies including ITV, Channel 5 and Yahoo!.

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The race to lead the state-owned broadcaster’s board has acquired additional importance since the resignation of Alex Mahon, its long-serving chief executive.

It has since been reported that Alex Burford, another Channel 4 non-executive director and the boss of Warner Records UK, is a possible contender to replace Ms Mahon.

A vocal opponent of Channel 4’s privatisation, which was abandoned by the last Conservative government, Ms Mahon is leaving to join Superstruct, a private equity-owned live entertainment company.

The appointment of a new chair is expected to take place by the autumn, with the chosen candidate expected to lead the recruitment of Ms Mahon’s successor.

The Department for Culture, Media and Sport has declined to comment on the recruitment process, while Mr Cooper could not be reached for comment.

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Satellite tracker Spaceflux reaches lift-off with £5m funding boost

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Satellite tracker Spaceflux reaches lift-off with £5m funding boost

A British space surveillance company which has won a string of government contracts will this week announce a £5.4m fundraising to expand its global network of advanced telescopes.

Sky News understands that Spaceflux, which was founded three years ago, has secured the injection of capital in a round led by the UK Innovation & Science Seed Fund (UKI2S), which is managed by Future Planet Capital, as well as Foresight Group and Blackfinch Ventures.

Seraphim Space, the listed specialist investor in space-related companies, is also contributing funding.

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Spaceflux uses artificial intelligence and optical sensors to track satellites and debris across all orbits, with its daylight tracking capability meaning it can expand the observation window beyond night-time operations.

Its provision of space situational awareness technologies is in growing demand amid warnings that a week-long disruption to satellite navigation could incur a £7.6bn hit to the UK economy.

In a statement to Sky News, Marco Rocchetto, CEO and co-founder of Spaceflux, said: “As space becomes increasingly essential to our economy, environment and daily lives, it is also becoming more congested and contested.

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“This investment strengthens our ability to protect satellite technology that delivers crucial insights to Earth around the clock, reducing collision risks, and supporting a safer, more sustainable space environment for future generations”.

The valuation at which the funding was being committed was unclear on Thursday.

Spaceflux, which serves government and commercial customers, has been the exclusive provider of geostationary satellite tracking for the Ministry of Defence and UK Space Agency since 2023.

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Alex Leigh, an investment director at UKI2S, said: “This investment marks a significant step in the convergence of defence and space, where dual-use technologies are becoming increasingly important to UK capability.

“Spaceflux’s technology offers critical insights to help monitor and safeguard orbital assets – supporting both national security and the wider commercial ecosystem.

“The company is well-positioned to scale its impact and meet the needs of customers navigating an increasingly complex space environment.”

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