A significant review has recommended replacing current regulatory bodies, including Ofwat, the Drinking Water Inspectorate, and the Environment Agency, with a new, “powerful” water regulator to overhaul the sector marred by issues such as sewage spills and financial mismanagement. The government is expected to adopt this recommendation for England and Wales, as proposed by former Bank of England deputy governor Sir Jon Cunliffe.
Critics have long argued that Ofwat has failed to address underinvestment in infrastructure and financial mismanagement by water companies since the industry’s privatization in 1989. Notably, Thames Water, the UK’s largest water company, is burdened with £20 billion in debt and on the brink of financial collapse, potentially requiring temporary nationalization.
Cunliffe’s review advocates for a new regulator with the power to “direct,” or take control of, failing water firms. Speaking on BBC Radio 4’s Today Programme, Cunliffe criticized Ofwat for lacking sufficient regulatory powers and being directed by the government to adopt a light-touch approach.
Additionally, the environment secretary, Steve Reed, announced plans to establish a legally empowered ombudsman to compensate consumers for issues like dry taps and sewage leaks. The review highlighted the failing current Drinking Water Inspectorate, arguing its insufficient staff, constrained by civil service rules, cannot tackle future challenges. Moreover, it calls for legislative changes to address the presence of pollutants such as PFAs and microplastics in the water supply.
The review also suggests preventing dramatic bill increases, like those seen in April and projected through the end of the decade, by ensuring consistent investment in infrastructure. This approach aims to avoid the necessity for urgent, costly repairs and upgrades that significantly hike consumer bills.
Source: https://www.theguardian.com/business/2025/jul/21/new-powerful-water-regulator-to-replace-failed-ofwat-in-drive-to-reset-sector
