In Oxfordshire, England, the Witney sewage treatment plant is being expanded to prevent raw effluent and storm water pouring into the river Thames and its tributaries. There is just one hitch: the cost of the project has almost doubled from £8.8mn to £17mn in the past 18 months.
Faced with public anger over polluted rivers, lakes and seas, regulator Ofwat, which sets infrastructure spending targets for water monopolies in England and Wales, has told companies to hasten investment in sewage infrastructure.
The demands for greater spending follow bumper years for water providers, which last year paid out £1.4bn in dividends.
But now the pressure on companies is rising: construction, labour, finance and energy costs have been soaring, fuelling concerns over how rapidly investment can be delivered, and whether the planned increase is enough to provide real reductions in sewage outflows.
Last month, Ofwat set out a proposal to bring forward £1.6bn of expenditure originally planned for 2025 to 2030 to the next two financial years. More than £1bn will be aimed at reducing the number of annual average spills from storm overflows by 10,000 a year — a fraction of the 301,091 officially recorded in 2022.
But water companies are already behind on spending targets. Only three-fifths of the £2.2bn that water companies could have invested in wastewater infrastructure by 2025 has been spent so far, Ofwat confirmed. It added that those lagging are required to “develop an action plan”.
“I just don’t see how we can deliver bigger improvements more quickly,” said one water company executive who declined to be named. “Material costs have been rising as has energy and labour and that is going to make any big acceleration in improvements near impossible. And where do we get the workers?”
UK construction materials prices in March 2023 were 42 per cent higher than before the pandemic in January 2020, while average wages in construction were 12.3 per cent higher, according to official statistics. The number of construction workers has also fallen by about 250,000 since 2019, leading to skills shortages across industry.
“Water companies may want to ramp up major improvements quickly but that is likely to be very difficult given that construction is already suffering from severe skills and capacity constraints,” says Noble Francis, economics director at the Construction Products Association, an industry body.
Christopher Gasson, owner of Global Water Intelligence, a data provider, said that by bringing forward spending, which is paid for by customer bills, Ofwat has avoided the crucial issue of how to encourage companies to invest more in the long term.
“To increase spending, Ofwat would need to agree an interim determination which would go straight on to customer bills,” Gasson added. “It would be political death to pursue this at the moment.”
There is a lot of catch-up work to be done. Although companies often point to unpredictable weather and climate change as the cause of sewage overflows, a study by Imperial College London this year found that by far the biggest problem was insufficient capacity at wastewater treatment plants, even in the absence of extreme rainfall.
The largest 10 companies’ total spending on wastewater infrastructure averaged £3bn a year in the 2000s. Since then, the figure has fallen in real terms to £2.7bn in the 2020s, so far, according to Ofwat data, despite the population they serve increasing by 16 per cent in the past two decades.
Investment in water infrastructure also appears to be lagging Europe. Wastewater companies in England and Wales upgrade 0.2 per cent of their assets each year, a third of the European average rate of 0.6 per cent, according to a report published last year by the industry lobby group Water UK.
David Lloyd Owen, managing director at Envisager, a water consultancy, said the UK is behind the EU in its ambitions.
The government has ruled that all combined sewage overflows — pipes that release sewage and stormwater to reduce flooding risks — must be fitted with “event duration monitors” by the end of the year.
But companies are not required to report all overflows, or the quantity or the level of pollution in the water. The Environment Agency also found last year that many EDMs installed so far have been poorly maintained.
While the EU’s urban wastewater treatment directive requires continual pollution tracking from all urban combined sewage overflows from 2025, the UK is still consulting on proposals to install monitors downstream or upstream to measure pollution from CSOs, Lloyd Owen said.
“We are still at the consultation stage and talking about these long deadlines while the European nations are already committed to this,” he said.
The Department for Environment, Food and Rural Affairs said it was “consulting to give regulators more powers to impose much larger penalties for polluters without needing to go to court”.
With 67 per cent of overflows coming from just over a quarter of combined storm overflow pipes, spending should be targeted towards the most problematic CSOs and sewage treatment plants, said Lloyd Owen.
Building sustainable urban drainage systems, increasing absorption in cities through, for example, replacing concrete with plants were also needed, he added.
Public pressure is beginning to drive change. The owners of Thames Water, which is expanding the sewage plant at Witney, have for the first time since privatisation in 1989 injected £500mn cash into the business, more than half of which will be spent on improving sewage treatment works. A further £1bn in equity has been pledged over the next two years, subject to conditions.
“We are under no illusions of the scale of the challenge ahead of us in improving the health of our rivers,” said Sarah Bentley, chief executive of Thames Water.
Back in Oxfordshire, near Witney, where a small scope increase has also added to the costs, Ashley Smith, of the Windrush Against Sewage Pollution campaign, said any rise in prices were a “self-inflicted wound caused by water companies”.
“They have profited by choosing not to invest when it would have been cheaper,” he said. “We say make the owners and executives take the hit, not bill payers.”
