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2025 business water price rise
Water rates have risen faster than general inflation in recent years as the industry addresses the growing problem of water scarcity and other environmental challenges.
April 2025 will be no exception, as the industry seeks to increase investments in improving British water infrastructure.
In this guide, we cover the latest information on business water rate price rises, including:
April 2025 business water rates increase by region
The April 2025 business water price rise will be finalised in February, but recent Ofwat publications indicate an above-inflation increase in almost every region.
In December 2024, Ofwat published its final determination for the wholesale water price increases for the next five years.
The final determination confirms an average 20% increase in the wholesale price of water from 1 April 2025, with significant regional variations as shown below.
Wholesale water rates make up the majority of business water bills, so the approved increases outlined above will significantly impact the 2025 price rise.
British water industry investment plans
In December 2024, Ofwat approved a £104 billion investment in infrastructure by local water companies for the period between 2025 and 2029.
This significant planned investment will fund the following long-term initiatives by individual water companies:
- £12bn for 2,884 upgrades to sewage works to reduce sewage discharge into rivers.
- £6bn on nutrient reduction to lower fertiliser pollution in rivers.
- Construction of nine new reservoirs to support population growth.
- £1.5bn on the roll-out of smart water meters.
- Measures to offset the higher costs of business electricity rates.
The investment plans will be funded through domestic and business water rate increases over the five-year period.
2024 business water price rise
Our business water experts have crunched the numbers for the April 2024 business water price increase.
The following table summarises the impact for a small company paying default water rates based on an annual usage of 120 cubic metres of water (approximately the same as the average household).
| Wholesale region | Default supplier | 23/24 | 24/25 | Increase | Increase % |
|---|---|---|---|---|---|
| Scottish water | Business Stream | £608 | £661 | £53 | 8.8% |
| Anglian Water | Wave | £630 | £677 | £47 | 7.5% |
| Northumbrian Water | Wave | £550 | £622 | £72 | 13.0% |
| Severn Trent Water | Water Plus | £542 | £583 | £41 | 7.5% |
| South West Water | Source for Business | £807 | £874 | £67 | 8.3% |
| Southern Water | Business Stream | £627 | £709 | £82 | 13.0% |
| Thames Water | Castle Water | £519 | £567 | £48 | 9.3% |
| United Utilities Water | Water Plus | £655 | £709 | £54 | 8.3% |
| Wessex Water | Water 2 Business | £669 | £735 | £66 | 9.8% |
| Yorkshire Water | Business Stream | £587 | £638 | £51 | 8.8% |
In compiling the above data, we assumed:
- A standard water supply pipe diameter of 15mm
- The standard return to sewerage allowance for the region
- The lowest band of surface drainage charges
- The most common tariff in the region (where applicable)
Here’s a link to our business water rates calculator, which will give you an exact breakdown of your company’s 2024/25 rates.
Reasons for the 2024 business water price rise
Business water rates comprise the underlying wholesale water rates and the retail fee charged by business water suppliers.
Both components increased in price on 1 April 2024, contributing to an average 9% increase in small business water rates. However, there are significant regional variations. Let’s explore both.
Increase in wholesale water rates 2024
Wholesale water rates are the charges levied by the local water company for providing a supply of potable water and for operating the local water and sewerage infrastructure.
These rates are closely regulated by Ofwat and have been approved for the 2024-25 year, resulting in an average increase of 6.1%. Significant regional variations exist in the rate changes, attributable to the investment plans of each individual water company, with some areas even seeing reductions in charges.
Although the precise increase will depend on your specific business water tariff type, the expectations for the average increase are as follows:
| Region | 2024 wholesale price rise |
|---|---|
| Anglian | 8.2% |
| Welsh Water | -3.9% |
| Hafren Dyfrdwy | 19.6% |
| Northumbrian | 9.0% |
| Severn Trent | 6.6% |
| South West | -0.4% |
| Southern | 11.9% |
| Thames | 3.3% |
| United Utilities | 7.8% |
| Wessex | 12.1% |
| Yorkshire | 6.1% |
| Scotland | 8.0% |
| Average: | 6.1% |
Sources:
- Ofwat – Average bills press statement – 2024 – 25
- Scottish Water – 2024 – 25 charges announcement
- Discover Water – Annual Bill
Increase in retail business water rates 2024
Retail fees are the additional amount charged by the business water suppliers for their role of providing customer services, meter readings and billing to their customers.
Increases in retail fees are closely controlled by Ofwat, who have published their permitted adjustment for 2024-25.
The Ofwat price cap on retail fees involves a complex mechanism (expanded upon below), but a typical small business consuming 120 cubic metres of water (approximately the same as the average household) saw its retail fee increase by 11.5% from 1 April 2024.
💡 The Welsh water market is not deregulated, meaning businesses in Wales are only affected by the increases in wholesale water rates.
Business water price cap
Since deregulation in 2017, English businesses have been able to switch business water suppliers and secure a fixed, lower retail fee with any supplier in the market.
However, approximately 80% of English businesses have never switched suppliers, so they pay the “default business water tariffs” set by the default water supplier in their region.
Ofwat, the regulatory body, closely controls these default retail rates, imposing a price cap to safeguard businesses that have not switched suppliers and to limit the price rise each year.
The default business water rates incorporate underlying wholesale price rise plus increases in the retail fee. The default water supplier in each region publishes their default rates online.
Typically, default water suppliers charge the maximum permitted under the default price cap, meaning the establishment of this cap has a direct impact on most businesses.
For further reading we have a dedicated article explaining the price control approach of Ofwat and Ofgem.
How does the default contract price cap work?
The Retail Exit Code defines a maximum that can be charged to the following two groups of business water customers on the default contract.
- Group One – Small businesses that use less than 500m3 annually – 1,049,000 businesses (85% of the market)
- Group Two – Medium businesses than 500 but less than 50,000m3 consumption annually – 170,000 businesses (14% of the market)
The Retail Exit Code safeguards 99% of businesses in the commercial water market, excluding only high industrial users. It is presumed that these high-use businesses, due to their significant expenditure on water, will self-manage the negotiation of water contracts.
The Retail Exit Code calculates the maximum retail business water rates that can be charged as follows:
Group One water price cap
The Retail Exit Code outlines the method for calculating the maximum retail business water rates that can be charged to small commercial users of water, as follows:
Allowed Retail Cost per Customer + Net Margin + Allowed Bad Debt Allowance
- Allowed Retail Cost per Customer: This is intended to reflect the costs incurred by business water suppliers in providing meter readings, customer service, and billing services.
- Net Margin: This represents the permitted profit margin above the cost of serving customers.
- Allowed Bad Debt Allowance: This is a risk premium that accounts for the business water suppliers’ exposure to the risk of bad debt, exacerbated by the pandemic.
Group Two water price cap
The Retail Exit Code limits the retail business water rates that can be charged under a default contract for medium-sized commercial users of water to:
- 8% of the underlying wholesale charges for water and
- 10% of the underlying wholesale charges for wastewater.
How the default water price cap works in practice
Here’s a typical example of a Group One customer to demonstrate how the Retail Exit Code gets applied in practice.
A small London-based office that consumes 120 cubic meters of water annually (about the same as the average household). If the office pays water under a deemed contract, they’ll pay Castle Water (the default supplier in the Thames Water area) £423 each year, broken down into the following:
Source: Thames Water wholesale rates and Castle Water scheme of charges.
Thames Water levies wholesale water fees (in blue) for operating and maintaining the water infrastructure that delivers fresh water and removes wastewater from the office.
The yellow retail fee of £75.90 is the default charge levied by Castle Water for their work of conducting meter readings, providing customer services and billing the customer. The £75.90 represents the maximum that Castle Water can charge under Group One rules within the Retail Exit Code.
The key question is whether the £75.90 is sufficient for Castle Water to perform its duties as a business water supplier. As we’ll see in the next section, there are significant differences in how high the parties think this default retail fee should be.