Water bills set to rise by more than expected

Later this week, the government will also announce plans that are expected to lead to the biggest overhaul of the water industry since privatisation in the late 1980s.

The aim is to protect customers from the impact of rising bills, while also finding funding for the huge investment that is required to deal with population growth, the impact of climate change and an ageing water infrastructure.

While the entire sector is facing challenges, the rises Ofwat proposed in July varied greatly from company to company.

The highest agreed rise, of 44%, was for Southern Water, and the lowest was a rise of 6% for Affinity Water.

Thames Water, the UK’s largest water company, was given the go-ahead to raise bills 23% rise, but since then has said it will not survive if it cannot raise bills by 59%.

Thames shareholders refused to inject promised funds into the company earlier this year as they said it would be impossible to make any profit at proposed bill levels.

One of the reasons that Ofwat is considering permitting bigger bill increases is to reflect higher financing costs, the BBC understands.