Thames Water asks regulator to raise average bills by £228 a year
Thames Water has said that it wants to raise average water bills by £18.99 a month – or £228 a year – to fund investment.
In its statement on Wednesday, the company wrote:
Our business plan will see customer bills increase to fund much needed investment. By the end of 2030, the average monthly customer bill will have increased by £18.99 from what they pay today in real terms. We are committed to doing our best to ensure that customers do not pay more than they need to for vital investment by becoming a more agile, efficient, and responsive company and we will ensure we support our customers who will struggle to pay.
Ofwat proposed spending cuts to prevent bills from rising too far. However, Thames Water said that the cuts would go too far, and would need to be covered by bill increases instead:
The scale of the cuts Ofwat proposes in its draft determination, a 25% decrease to our proposed expenditure, is not tenable and renders our plan uninvestible.
Key events
Closing summary: Thames Water fears ‘multi-billion-pound gap’ if it cannot hike bills
Thames Water has said that proposed limits to water bills coupled with proposed spending cuts would leave a “multi-billion-pound gap” in its finances if it is to get its infrastructure up to scratch.
The company wants to hike bills by more than £200 to about £650, it said on Wednesday.
It proposed a five-year plan, to which Ofwat responded by scaling back its bill increases. Thames has now laid out its stall for a final time before Ofwat makes its “final determination”.
In the meantime, there will be deep uncertainty over what is possible to save the water company, which will run out of money in June if it cannot raise new capital.
Thames Water laid out “significant concerns” about cuts that would be imposed by Ofwat, and said there was a “multi-billion pound gap between what we are allowed to charge our customers and what is needed to deliver against the ambitions that customers and stakeholders have set for us”.
Thames Water said that Ofwat cut its spending on upgrades to wastewater treatment works in half and has “set targets that are unachievable”. The targets would expose the company to “disproportionate penalties and excessive downside risk, impacting investibility and ultimately our ability to deliver better infrastructure”.
In other business and economics news today:
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Norwegian oil company Equinor may reconsider investments in the UK including the Rosebank oilfield off Scotland if Labour follows through on plans to increase taxes on the sector, an executive has said.
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Polestar has replaced its chief executive Thomas Ingenlath with the former boss of Opel, Michael Lohscheller.
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Hyundai has said it will double the number of hybrid cars it sells, in the latest response by a major carmaker to the softening in demand for battery electric vehicles.
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Victoria Beckham’s fashion and beauty business narrowed its losses last year as sales soared by 52% to £89m.
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Lego plans to make half the plastic in its bricks from renewable or recycled material rather than fossil fuels by 2026, in its latest effort to ensure its toys are more environmentally friendly.
You can continue to follow the Guardian’s live coverage from around the world:
Keir Starmer hails ‘once in a generation’ treaty with Germany
Harris and Walz kick off bus tour of Georgia to build momentum in swing state
In our coverage of the Russia-Ukraine war, a Ukrainian drone attack sparks fire at Rostov oil depot
In our coverage of the Middle East crisis, 10 Palestinian militants are killed in major West Bank raids by Israel
Thank you for joining us today on the business live blog. Please do join us tomorrow (for the fallout from tonight’s earnings from chip company Nvidia). JJ
Thames Water had asked permission from Ofwat to raise bills by 40% in its five-year plan. That plan was rejected by Ofwat.
The company has persevered. It has come back today asking for a 52% increase.
Average bills in 2023 to 2024 were £433, according to the Press Association, so an extra 52% would mean an average bill of more than £650.
Thames Water is hoping to raise £3.3bn in equity. To do that, it will have to get its turnaround plan approved by regulators, who control its licence to operate.
The company argues that “now is the time for difficult choices” – although those choices will not affect the former shareholders who extracted huge dividends after the water sector was privatised.
Adrian Montague, chair of the board of Thames Water, indicated there will be a lot of back and forth before the company’s path is clear. He said:
Thames Water’s plan has the full backing of the board. It sets out a path to adapt the business for the future and improves its service in the face of climate change and population growth.
Ofwat’s draft determination and our response to it is one stage in the process – there will be many subsequent stages.
After decades of focusing on keeping bills low, now is the time for difficult choices. It’s the responsibility of the company, our regulators and the Government to seek solutions in the best interests of customers and the environment. We will continue to work collaboratively as we launch our process to raise the equity we need and seek a final determination that enables the delivery of our ambitious plan.
Thames Water debt investors do not appear to have welcomed the news that the company may be “uninvestible” if it cannot raise bills further.
The yield on a senior 2027 bond jumped by more than a percentage point on Wednesday to 16.079%. It started the day at 15%. (Yields move inversely to bond prices, so rising yields usually mean that investors are selling the bonds.)
Thames Water serves 16m people in London and southeast England. So what would those customers get for their money if the company is allowed to raise bills?
It said it wants to invest £20.7bn on upgrades. This would include:
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Replacing over 570km of water mains
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Replacing 54,000 lead pipes
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Upgrading 150km of sewers to “lower the risk of sewer collapses”
This would cut the number of times that sewage floods properties (ugh!) by 16%, Thames Water said.
It would reduce the total number of pollution incidents by 30%, and cut leaks by 21% (saving energy and water). It would also reduce overall water use by 4%, and the opening of the Thames Tideway tunnel, London’s “super-sewer”, is hoped to reduce combined sewer overflows by 95%.
Thames Water asks regulator to raise average bills by £228 a year
Thames Water has said that it wants to raise average water bills by £18.99 a month – or £228 a year – to fund investment.
In its statement on Wednesday, the company wrote:
Our business plan will see customer bills increase to fund much needed investment. By the end of 2030, the average monthly customer bill will have increased by £18.99 from what they pay today in real terms. We are committed to doing our best to ensure that customers do not pay more than they need to for vital investment by becoming a more agile, efficient, and responsive company and we will ensure we support our customers who will struggle to pay.
Ofwat proposed spending cuts to prevent bills from rising too far. However, Thames Water said that the cuts would go too far, and would need to be covered by bill increases instead:
The scale of the cuts Ofwat proposes in its draft determination, a 25% decrease to our proposed expenditure, is not tenable and renders our plan uninvestible.
Thames Water asks regulator once more for bills to rise
Thames Water has asked regulators to allow it to raise bills above a cap set by regulators after saying the limits made its turnaround plan “not deliverable”.
The company said on Wednesday that it has submitted responses to Ofwat, the regulator, asking for permission to charge customers more in order to invest in upgrading crumbling infrastructure.
Ofwat last month allowed bills to rise, but said it its “draft determination” that the bill increases would be limited to an average of £94 over the next five years.
Chris Weston, chief executive of Thames Water, said:
On the basis of the draft determination given to us by Ofwat, both our own and independent analysis shows that our plan would be neither financeable nor investible and therefore not deliverable. It would also prevent the turnaround and recovery of the company.
We have listened carefully to Ofwat’s feedback and have responded constructively to address the issues raised, updating our plan to reflect stretching goals, while offering changes that would give us the opportunity to secure the necessary investment so that our ambitious plan can be delivered for our customers and the environment.
Weston, who took over Thames Water in December, acknowledged that “structural underfunding has led to significant asset health challenges alongside a substantial increase in the group’s leverage”.
He said that customers are “not being asked to pay twice”, but rather to make up for “years of focus on keeping bills low”.
Equinor to ‘reconsider UK oil investments’ if taxes rise claims executive
Norwegian oil company Equinor may reconsider investments in the UK including the Rosebank oilfield off Scotland if Labour follows through on plans to increase taxes on the sector, an executive has said.
Philippe Francois Mathieu, who leads oil exploration and production for Equinor outside its home country, said that it may not be attractive to invest in the UK if taxes increase. He was speaking to Reuters in an interview on the sidelines of an oil fair in Stavanger, Norway.
Labour’s manifesto said that “oil and gas production in the North Sea will be with us for decades to come”, but that also that it will fund new energy investments by closing “loopholes in the windfall tax on oil and gas companies”.
Equinor and Ithaca Energy, a smaller North Sea oil company, said in September that they would invest $3.8bn (£2.9bn) in developing Rosebank, 130km northwest of the Shetland Islands. It followed approval from the UK government.
However, the decision to grant the licence has proved deeply controversial. It contradicts the advice of the government’s own Climate Change Committee. The International Energy Agency has said that no no new oil and gas exploration should take place if the world is to limit global heating to 1.5C above preindustrial temperatures.
Mathieu on Wednesday said:
We need to look at our appetite to invest further in the UK based on the fiscal regime … it could be that the economics are really, really hard impacted.
And in that case, we need to look into what we want to do further with the Rosebank project.
It is fair to say that the GMB union is not happy with the UK water industry’s claim that bills need to go up to prevent sewage leaks.
“Absolute balderdash” is the reaction this morning to the comments by Water UK boss David Henderson.
Gary Carter, GMB national officer, said:
Water companies have had the money, failed to invest in plugging leaks and preventing sewage spills and now want more money to do what they failed to do. It’s absolute balderdash and Ofwat must say enough is enough.
If they want investment, water companies must be fundamentally reformed. They have failed bill payers and their employees who have faced increased assaults and abuse because of the tarnished reputations of their employers.
It’s time the shareholders paid for the investment the water companies promised but haven’t delivered.
Electric carmaker Polestar replaces chief executive
More electric vehicle news: Polestar has replaced its chief executive Thomas Ingenlath with the former boss of Opel. Michael Lohscheller will take over from Ingenlath from 1 October.
Polestar was spun out of Sweden’s Volvo, but it is owned by China’s Geely, which manufactures many of its vehicles.
Polestar has been one of the few new electric vehicle brands based in Europe to make it to mass sale, but its share price has slumped more than 90% from the peak of the coronavirus pandemic mania for electric vehicle stocks.
The softly spoken Ingenlath was one of a clutch of automotive chief executives who made the switch from previous design roles (cf. Henrik Fisker). Polestar managed to produce well reviewed cars, but it has struggled with model delays. Volvo, which is listed but part-owned by Geely as well, in February said it would no longer fund Polestar because of losses.
Ingenlath said:
I am very proud of what we’ve achieved together in the last seven years. We had the vision of an electric premium brand which puts performance and design at its core. And we made it, the dream became reality: Polestar is the only true global premium electric brand, we just launched the Polestar 3 and 4, we are producing on two continents – thank you to everybody who contributed so far on this journey.
It was a lifetime experience to build up this brand with you all. I wish Michael and the team the best for the next chapter of Polestar.
Lohscheller has previously served as chief executive of Opel – the European name for Stellantis’s Vauxhall brand – Vietnamese startup VinFast and Nikola, an electric lorry company that has struggled to launch products.
For the other side of the coin to Hyundai’s decision to shift emphasis more to hybrids, take a look at China’s Xpeng: it has revealed a new electric car priced at only 119,800 yuan (£12,700).
The Mona MO3 electric car will be one of the cheapest on the market from a well-established brand.
The release underlines the threat to traditional carmakers in Europe, the US, and Asia (including Hyundai) who are trying to balance profitability with investments in electric cars. Yet while they waver, Chinese carmakers are racing to produce electric cars far more cheaply than older manufacturers can manage.
Xpeng has previously focused on more premium cars, but it bought the programme developing the Mona from ride-hailing company Didi at a discount after the latter came under pressure from China’s government during a crackdown on tech companies. The purchase allowed Xpeng to save on development costs, according to the Financial Times.
At the more expensive 155,000 yuan the Xpeng car will be given autonomous driving abilities – still a rarity towards the lower end of the electric car market.
UK housebuilding targets ‘will be missed’ if no water bills hike, industry claims
Helena Horton
Labour’s housebuilding targets will not be met if water companies are not allowed to hike bills, the leader of an industry lobby group has said.
When asked why the water industry is asking for bills to rise £26 a year rather than the £19 a year proposed by regulator Ofwat, David Henderson, the chief executive of Water UK, threatened that Labour’s housebuilding targets will not be met and sewage will still be dumped into the seas if water companies are not allowed to raise bills.
He told BBC Radio 4:
Unless we get that full investment amount we are not going to be able to secure economic growth, we are not going to be able to build the £1.5m homes that we desperately need and we are not going to be able to end the sewage flowing into our seas.
Henderson added that discussing the billions paid to shareholders in dividends, which could have instead been invested into the water system over the years to build sewers and reservoirs is “neither here nor there”. He admitted “all of it [2.5bn dividends paid out recently] could have been used for investment. But if you want investors to put their money into the UK you need to see a return”. He added:
We are not allowing our system and economy to grow as it should because of a lack of water. Arguing about dividends is not going to solve the problems we have for the future.
Investors are threatening to pull out of water companies unless water bills are allowed to rise more sharply, Henderson said:
Investors are telling us, they have choices, and if we want them to put their money into the UK, into the water system so it can be expanded and upgraded, then they need to see a modest return. And the return being proposed by Ofwat is simply not enough to allow the improvements to occur. Returns are very modest, five companies made a loss last year and this is not an industry awash with profit.
No rational investor at the moment under current arrangements would entertain the proposal that Ofwat is putting forward.
He also argued the problem is not with privatisation, as the Seine in Paris was polluted during the Olympic Games and France’s system is state-run. Henderson said: “People are right to be angry but it is not confined to this country. We saw in Paris, in a state-owned system, that the triathlon had to be postponed because of pollution in their river.”
Hyundai expects a burst of hybrid sales in North America in particular, as tightening emissions regulations come up against public charger networks that can be poor in some places.
The company said it will make hybrid vehicles at its new Georgia, US, factory along with EVs.
Jaehoon Chang, chief executive at Hyundai Motor, said (via Reuters):
Recently, the speed of conversion to electric vehicles has been slowing. As a result, demand for hybrids is increasing, and hybrids are becoming a basic option rather than an alternative to internal combustion engines.
Hyundai to double number of hybrids amid softening demand for electric
Hyundai has said it will double the number of hybrid cars it sells, in the latest response by a major carmaker to the softening in demand for battery electric vehicles.
The South Korean manufacturer said it will expand its range of hybrids, which combine a smaller battery with a fossil fuel engine, from seven to 14, including in its Genesis luxury brand.
However, the company did not downgrade its target to sell 2m electric vehicles by 2030. It said it will try to increase total sales – including the new hybrids – by 30%.
The world’s third-largest carmaker by sales unveiled the shift in strategy at an investor day on Wednesday. Its share price increased by 4.6% as shareholders welcomed a larger-than-expected share buyback worth 4tn Korean won (£2.3bn).
Hyundai is only the latest traditional carmaker to try to increase hybrid sales in response to a slowdown in demand from consumers for electric cars. Traditional carmakers have been keen to sell cars with petrol engines for as long as possible because they have been cheaper to make and are therefore more profitable.
Ford, Porsche, Mercedes-Benz and Bentley have all slowed the pace of electrification in recent months, as they try to protect their profits. Some of them announced more ambitious plans for electric cars during the coronavirus pandemic, when loose monetary policy helped spur demand for batter cars that were more expensive.
The carmakers argue that hybrids help to reduce overall emissions while addressing “range anxiety”, although their fossil fuel engines still produce much more carbon over their lifetime than battery cars, and cost more to run on average.
Caroline Flint, the chair of the Committee on Fuel Poverty, has said that “the dial hasn’t shifted” on cutting fuel poverty over the last five years, as she called for more support for household bills this winter.
There are 13.1m English households in fuel poverty, including 900,000 families with children. That is basically unchanged compared with last year.
Fuel poverty fell by 40% under the coalition and Conservative governments between 2010 and 2019. However, in the last five years from 2019 to 2024 fuel poverty did not fall to any meaningful extent.
Flint, a former Labour minister, said she hoped the energy summit today between bosses and government could start to move towards solutions to help vulnerable households, after the withdrawal of the winter fuel allowance from many pensioners.
She said she agreed with the principle of targeting winter fuel allowance so that the wealthiest did not receive it. However, she said that above the threshold for pension credit, the new eligibility criterion, “there are also significant numbers of pension households that will need that support”.
It would also do nothing for many households with children who could struggle this winter.
Energy debt in Great Britain at record levels – industry boss
Energy debt levels across Great Britain’s households are at their worst level since the start of the crisis prompted by Russia’s full-scale invasion of Ukraine, according to the head of the energy industry’s lobby group.
Emma Pinchbeck, chief executive of Energy UK, said she was concerned about how households would fare over winter.
While energy prices have fallen from their peaks, debt has built up over the two years since. She told BBC Radio 4:
We’ve been very worried. We’ve got record levels of debt. It’s if anything worse than at any other time in the crisis.
She said Labour should “move a portion of the policy costs off electricity bills into general taxation to rebalance some of the costs between electricity and gas”. At the moment electricity prices are set in line with gas markets, and “policy costs” which are aimed at stimulating green energy investments are the same across both types of energy use.
Labour should also double the warm homes discount, Pinchbeck said. The benefit is now a one-off £150 discount from electricity bills for those who receive pension credit or those on low incomes with high energy costs.
The Labour government needs a plan for “enduring support” for energy bills, according to the head of a lobby group for the industry.
Emma Pinchbeck, chief executive of Energy UK, told BBC Radio 4 that she backed Labour plans to increase the proportion of renewables powering Britain, which the government hopes will cut bills, but added that consumers will need support before those hoped-for benefits feed through.
She also defended the retail energy sector against accusations that it is making big profits while consumers struggle.
I completely understand why people would think that way given the reports of big profits elsewhere in the sector particularly in oil and gas production. But it’s important that people understand that the retail sector doesn’t make huge profits.
She said that some companies do make “small profits”, but that depends on them running efficient businesses.
In most of the time I’ve been doing this job they’ve been losing money. That’s because they’re exposed to the high gas prices that everyone else is, and they buy gas to sell to customers. Under the price cap they are limited in the profits they make.
The FTSE 100 has edged up by 0.1% in the first few minutes of trading.
There are very few big movers. B&Q owner Kingfisher is down by 1.8% after Citi downgraded its expectations for its shares.
Here are the opening snaps from across Europe, via Reuters:
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EUROPE’S STOXX 600 UP 0.2%
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BRITAIN’S FTSE 100 UP 0.2%; GERMANY’S DAX UP 0.3%
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FRANCE’S CAC 40 UP 0.3%; SPAIN’S IBEX UP 0.2%
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EURO STOXX INDEX UP 0.3%; EURO ZONE BLUE CHIPS UP 0.3%
Energy bosses to meet minister over fuel debts; regulator concerned over life insurance
Good morning, and welcome to our live, rolling coverage of business, economics and financial markets.
UK energy bosses are due to meet the minister whose brief includes fuel poverty and energy consumer issues, amid scrutiny on the government and industry ahead of a winter during which support for some pensioners has been withdrawn.
Miatta Fahnbulleh was elected MP for Peckham in July. She was formerly the chief executive of the New Economics Foundation, a left-wing thinktank, but now she has the ministerial brief of looking after energy consumers, including fuel poverty.
That role has been thrust into the spotlight early in the Labour government’s term, after chancellor Rachel Reeves limited the winter fuel allowance to those eligible for pension credit. The benefit was previously applied universally, but some Labour MPs have said they are worried about pensioners just above the threshold.
Executives from Centrica, EDF, E.On, Octopus Energy, Scottish Power, Good Energy, Rebel Energy, Ovo, So Energy, Ecotricity and Utility Warehouse are expected at the roundtable event with Fahnbulleh. Industry body Energy UK, the regulator Ofgem, and Citizens Advice will also attend.
Financial regulator to look at life insurance market
The UK’s City regulator has launched an investigation into insurers over concerns that the market for life insurance and income protection is not working well.
The Financial Conduct Authority (FCA) said that it would look at “pure protection” products, which pay out if the policyholder dies or is incapacitated due to illness or injury.
The regulator will look at “potential conflicts of interest in the structure of commission”. It will look specifically at four products: term assurance, critical illness cover, income protection insurance and whole of life insurance, including policies for over 50s that offer guaranteed acceptance.
Sheldon Mills, executive director of consumers and competition at the FCA, said:
Pure protection can offer peace of mind and financial security, often when people are at their most vulnerable. Consumers should be able to buy products which meet their needs and provide fair value.
We have seen indications that this may not be the case across the pure protection market and we will act if we find that the market is not working well.
