Ofwat has this morning confirmed provisional approval for £3.4 billion of funding for 13 water companies o improve infrastructure, support growth and improve the environment.

Of this, £1.2 billion will safeguard services and assets for future generations; £477m will be spent across the sector to meet growth and help to unlock housebuilding and data centre challenges; and £34 million will see PFAS and forever chemicals managed to ensure a reliable drinking water service.

The package is the result of a new Cost Change Process, created to enable companies to access additional funding for a range of priority areas where costs were uncertain or unknown at the time of the 2024 Price Review (PR24) final determinations in December 2024.

This process provides flexibility between Price Reviews, so important improvements and upgrades are not delayed until the next review scheduled in 2029.

Some of the projects for which funding has been agreed include:

• Multiple schemes across the country to increase capacity and unlock growth. For example: United Utilities will invest in new water infrastructure to enable data centres in East Manchester
• New investment in the Anglian Water region to unlock growth pressures quickly and deliver additional capacity at Flag Fen in Peterborough;
• Additional capacity at Newquay Wastewater Works which will benefit residents and allow increasing tourism in the area.
• Companies will increase their wastewater treatment capacity for enabling the building of new homes, including Severn Trent and United Utilities.
• Companies have been allowed an increase following additional requirements from the Drinking Water Inspectorate around PFAS. For example, Wessex Water will bring forward funding to complete works at one of its water treatment sites. This work was originally planned for the 2030-35 period.

Today's Draft Determinations follow a three-month review period, during which company requests were rigorously reviewed by Ofwat to ensure the proposed projects were evidenced: that they were the right option; offered value for money; and that customers were not being asked to pay twice for work previously funded.

Helen Campbell, Executive Director for Delivery at Ofwat, said:

"Our 2024 Price Review decisions are already enabling a £104bn programme of investment to produce better outcomes for customers, communities and the environment.

"The Cost Change Process strengthens the ability of companies to deliver without delay. The newly agreed funding will help unlock much-needed new housing development and boost business growth across a range of sectors, as well as improving drinking water quality and the removal of PFAS and forever chemicals.

"We will track performance to ensure companies are delivering the expected improvements for customers and the environment. If they don't, expenditure can be clawed back.”

Requests totalling £4.3 billion were submitted by 13 companies, of which £752 million was assessed to not be within the agreed scope of the Cost Change Process or there was insufficient evidence of need. Of the £3.533 billion within scope, 96% has been allowed in the Draft Determinations (£3.390bn).

The £143 million that has been rejected relates where there were gaps in elements of company cost estimates and the options analysis that supported their requests.

Price Control Deliverables (PCDs) will also be attached to allowed requests, setting out our expectations for delivery. Where water companies fail to deliver these outcomes or outputs, they will return funding to customers.

In some cases, expenditure will be allowed to be recovered through bills ahead of the next Price Review. This is on a case-by-case basis, considering factors such as how companies are progressing against their existing investment programmes.

Next steps

A period of public consultation on the Draft Determinations is now open and runs until 5pm on 24 September 2026. All feedback and evidence will be considered before the Final Determinations in December of this year.

To read the full suite of Cost Change Process documents and respond to the consultation, click here to visit the dedicated Ofwat Cost Change Process consultation webpage.