Business Water Price Increase

2025 business water price rise

Our business water experts have started to crunch the numbers for the April 2025 business water price increase. We update this article weekly, summarising the latest information.

As of mid-February 2025, only a few business water suppliers have published their rates.

The table below displays the published price increases, illustrating the impact on a small company paying default water rates based on an annual usage of 120 cubic metres (equivalent to the average household).

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

For more information about rates in your region, visit our business water rates calculator.

Avoiding the 2025 business water price rise

The business water price increase figures published above apply to default business water rates, which approximately 80% of British businesses pay.

In the deregulated water market for England and Wales, businesses can mitigate these price rises by securing a cheaper fixed water tariff with a more competitive supplier.

At AquaSwitch, we specialise in helping companies compare business water rates to find a more cost-effective tariff. Simply enter a few details about your business in our form above to discover how much your business could save today.

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) £712 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 £150.19 is the default charge levied by Castle Water for their work of conducting meter readings, providing customer services and billing the customer. The £150.19 represents the maximum that Castle Water can charge under Group One rules within the Retail Exit Code.