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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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‘It shouldn’t be like this’: Full-time workers relying on food handouts amid cost of living crisis

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'It shouldn't be like this': Full-time workers turning to food banks

At a community food table in Staffordshire, produce is being handed out for free.

“I need to come here otherwise we’d be living on bread,” Rebecca Flynn told Sky News.

The 51-year-old said: “I’m earning pretty decent money, but it’s not enough.”

Rebecca Flynn
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Rebecca Flynn

It gives you an insight into just how deeply the cost of living crisis is biting – because Rebecca is working full-time as an office manager for a day service for people with learning difficulties.

On top of that, she has a second job going door-to-door on evenings and weekends, selling cosmetics and homeware.

“There’s nothing more I can do. Unless I win the lottery or get another job. It should be noticed that people are in this state,” she says.

“Local councils, local governments, they need to see what’s going on, come to ground level. It’s 2025. It shouldn’t be like this.”

But it’s not just Rebecca working all hours and needing food handouts to survive.

Alex Chapman is the co-founder of the Norton Canes Community Food Table, and says a third of the people who use it are working full-time.

“It’s mad that you’re working a good job and you think you’d be able to afford everything and go on holiday and everything like that, but in reality they’re struggling to put food on the table,” he says.

“We’re seeing a massive increase in the people that are using the food table. We see them in their work outfits. Professionals, nurses – you don’t expect them to be struggling because they’re working full-time. People who aren’t working – you expect them to be struggling. But it’s across the board.”

Cannock Chase
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Cannock Chase

The food table is in Cannock Chase.

Sky News analysis of local authorities gives an insight into why people are feeling dissatisfied their salaries are no longer delivering the comfortable lifestyles they thought hard work and a good job would deliver.

Over the past few years, Cannock Chase has gone from being a middle-class part of Britain to one of the lowest-earning areas in the UK.

In 2021, UK average annual salaries were just short of £26,000 – Cannock Chase was almost identical, according to Sky News analysis of Annual Survey of Hours and Earnings data from the Office for National Statistics (ONS).

Since then, the UK average wage has increased by 21.6% – or more than £5,000 a year – keeping pace with high inflation.

But in Cannock Chase, salaries have only risen by 8.4% – meaning on average people are now £300 worse off per month than the average worker across the UK.

SEE HOW YOUR AREA HAS COPED WITH THE COST OF LIVING CRISIS

It won’t have escaped your attention that prices have gone up, by a lot – by a fifth since 2021, the highest sustained rate since the 1990s – with some of the biggest rises among essentials like energy and food.

But, across the whole country, wages have actually done a pretty good job at keeping up with inflation. The problem is that the wage increase is an average, made up of highs and lows, while the price rises affect us more uniformly.

That means if you haven’t had a pay-rise, you will quite quickly find that you can’t afford as many of the things you used to.

People in places like Brentwood in Essex, the Cotswolds in rural Gloucestershire, and Melton in Leicestershire, have seen their wages increase at twice the rate of prices in the last few years, on average.

But on the other end of the scale are places like Cannock Chase, where inflation has been more than double the rate of wage increases.

It used to be a place where average earnings pretty much exactly reflected the UK midpoint. Now, people in Cannock are about £300 worse-off every month than the average person.

See how your area compares with our look-up.

Louise Schwartz, who has two children, describes herself as middle-class. After 20 years in the classroom she now has three jobs, working 50 hours a week as a teaching coach, at a software firm and giving private music lessons.

Her husband is an estate agent. They have a mortgage and three cars and together earn around £80,000 a year.

She says the family loves travelling together but can’t afford to go on holiday this year: “It makes me feel sad for my kids, more than anything, that we can’t give them a week away.

“We have food on the table, we’ve got heating, we’ve got cars to drive. But there are definitely some luxuries that we’ve cut back on recently.

“We don’t do expensive supermarkets. We don’t do expensive brands. We do whatever’s on offer for that particular week. My eldest son has started driving, which has then had an impact on my daughter’s horse-riding lessons.”

Louise Schwartz
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Louise Schwartz

Louise adds that the family have a hot tub in the garden that they bought years ago, but because of the cost of electricity, they don’t use it.

I ask her: “What does it say that a teacher and an estate agent both working full time can’t afford to go on holiday this year?”

She replies: “I think a lot of people might not be surprised by that because I think people are probably in a similar position but maybe we just don’t talk about it.”

Full-time workers tell us again and again they thought their lifestyles would be more comfortable – that the work ethic would be delivering more than it is.

Heidi Boot
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Heidi Boot

It seems the dissatisfaction is not only what one person described as “robbing Peter to pay Paul”, but also the lack of what people refer to as “pleasure money”.

Heidi Boot is what you might call the backbone of the middle classes – running a small business full-time called HB Aesthetics, a salon that does eyebrows, eyelashes and nails.

“I feel like everybody is stretching their appointments. People are working so hard for their money and they’ve got nothing to show for it. They’ve paid all their bills and now they’ve got nothing left to spend on themselves,” she says.

“It shouldn’t be that way. But because I see it all the time I feel like it’s just the normal now.”

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The constituency of Cannock Chase has always voted the way of the country – and at the last election showed significant support for Reform.

The financial woes will worry the government, which insists it’s taking action to give workers more money in their pockets.

But there’s no denying the despairing mood of middle England in the political battlegrounds that brought Labour to power.

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O2 arena lease snapped up by pensions giant Rothesay

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O2 arena lease snapped up by pensions giant Rothesay

The long-term lease to the O2, London’s best-known live entertainment venue, has been sold to Britain’s biggest pensions insurance specialist.

Sky News understands a deal was signed last week for Rothesay, the title sponsor of England’s home Test cricket matches, to acquire the landmark’s 999-year lease for about £90m.

The agreement, which is likely to be announced within days, comes more than two months after Sky News reported that Rothesay was the frontrunner to clinch a deal.

Rothesay has become one of Britain’s most successful specialist insurers, having been established in 2007.

It now protects the pensions of more than one million people in Britain and makes more than £300m in pension payouts every month.

The auction of the O2 lease kicked off several months ago, when Cambridge University’s wealthiest college, Trinity, instructed advisers to launch a sale process.

Trinity College, which ranks among Britain’s biggest landowners, acquired the site in 2009 for a reported £24m.

The O2, which shrugged off its ‘white elephant’ status in the aftermath of its disastrous debut as the Millennium Dome in 2000, has since become one of the world’s leading entertainment venues.

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Operated by Anschutz Entertainment Group (AEG), it has played host to a wide array of music, theatrical, and sporting events over nearly a quarter of a century.

Trinity College, which was founded by Henry VIII in 1546, bought the O2 lease from Lend Lease and Quintain, the property companies that had taken control of the Millennium Dome site in 2002 for nothing.

In a joint statement issued in response to an enquiry from Sky News, Rothesay and Trinity College Cambridge said they were “pleased to confirm that Rothesay will be the long-term owner of The O2 arena, following a competitive auction process for the lease of this London landmark”.

A spokesperson for Rothesay said separately: “Prestigious and high-quality property assets like the O2 form an important part of Rothesay’s investment strategy, providing the predictable and dependable returns which create real security for the one million-plus pensions we protect.”

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Advertising mogul Sorrell approached about S4 Capital deal

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Advertising mogul Sorrell approached about S4 Capital deal

Sir Martin Sorrell, the advertising mogul, has received a number of merger approaches for S4 Capital, the London-listed marketing services group he founded seven years ago.

Sky News can reveal that Sir Martin has been contacted in recent weeks by potential suitors including One Equity Partners, a US-based private equity firm which focuses on acquiring companies in the healthcare, industrials, and technology sectors.

This weekend, analysts suggested that One Equity would seek to combine S4 Capital with MSQ, a creative and technology agency group it bought in 2023.

Further details of the possible tie-up were unclear on Saturday, including whether a formal proposal had been made or whether S4 Capital might remain listed on the London Stock Exchange if a deal were to be completed.

S4 Capital is also understood to have attracted recent interest from other parties, the identities of which could not be immediately established.

In March 2024, the Wall Street Journal reported that Sir Martin had rebuffed several offers from Stagwell, an advertising group led by Mark Penn, a former adviser to President Bill Clinton.

New Mountain Capital, another American private equity firm, was also said at the time to have held talks about buying parts or all of S4 Capital.

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News of One Equity’s approach puts the venture founded by one of Britain’s most prominent business figures firmly in play after a torrid period in which it has been buffeted by macroeconomic headwinds and a number of accounting issues.

Sir Martin founded S4 Capital in 2018, months after his unexpected and acrimonious departure from WPP, the group he transformed from a manufacturer of wire baskets into the world’s largest provider of marketing services.

The businessman, who has voting control at S4 Capital, used his deep network of institutional relationships to raise money for an acquisition spree at S4, which included technology-focused agencies such as MediaMonks and MightyHive.

S4’s clients now include Alphabet, Amazon, General Motors, Meta, T-Mobile, and Walmart.

Sir Martin’s decision to target acquisitions in the digital content and programmatic media arenas reflected the priorities of what he described as a marketing services group for a new era.

At WPP, he was the architect of a now-widely replicated strategy to assemble hundreds of agency brands under one holding company.

By the time he stepped down, WPP was the owner of creative agency networks such as JWT and Ogilvy, while its media-buying muscle was channelled through the global subsidiary GroupM.

The latest approaches for S4 Capital come during a period of profound change in the global marketing services industry, as artificial intelligence dismantles practices and creative processes that had evolved over decades.

Sir Martin has spurned few opportunities to criticise his successor at WPP, Mark Read, as well as the wider advertising industry, in the seven years since he established S4 Capital.

Last month, WPP announced that Mr Read would be replaced by Cindy Rose, a senior Microsoft executive who has sat on the company’s board as a non-executive director since 2019.

“Cindy has supported the digital transformation of large enterprises around the world – including embracing AI to create new customer experiences, business models and revenue streams,” the WPP chairman, Philip Jansen, said.

“Her expertise in this landscape will be hugely valuable to WPP as the industry navigates fundamental changes and macroeconomic uncertainty.”

WPP has also forfeited its status as the world’s largest marketing services empire to Publicis, and will be shunted even further behind the sector’s biggest players once Omnicom Group’s $13.25bn (£9.85bn) takeover of Interpublic Group is completed.

At the time of Sir Martin’s exit from WPP in April 2018, the company had a market capitalisation of more than £16bn.

On Friday, its market value at its closing share price of 367.5p was just £4.23bn.

Last month, the advertising industry news outlet Campaign reported that WPP had held tentative discussions with the consulting firm Accenture about a potential combination or partnership, underscoring the pressure on legacy marketing services groups.

This weekend, it remained unclear how likely it was that Sir Martin would consummate a deal to combine S4 Capital with another industry player such as One Equity-owned MSQ.

Shares in S4 Capital closed on Friday at 21.2p, giving the company a market capitalisation of £140m.

The stock has fallen by nearly 60% during the last 12 months, and is more than 90% lower than its peak in 2022.

At one point, Sir Martin’s stake in S4 Capital was valued at close to £500m.

A spokeswoman for S4 declined to comment, while a spokesman for One Equity Partners said by email: “OEP is not commenting on this matter.”

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