Water regulator Ofwat has approved spending of £104bn for infrastructure upgrades by water companies, six months after threatening to cut the figure.
The announcement today (19 December) comes just six months after Ofwat announced plans to cut the amount to just £88bn.
Construction News understands that the restoration of the original figure came partly in response to business rates increases, as well as increased investment requirements from the Environment Agency, Natural Resources Wales and the Drinking Water Inspectorate.
The investment – which will be released over the next five years – will include £12bn for more than 2,800 projects to reduce spills from storm overflows, £2bn worth of funding to drive investment in nine new reservoirs and water transfer schemes, and £456m to replace 8,445km of water mains.
The funding announcement also allocated £6bn to combat nutrient pollution for around 1,000 sites.
The regulator added that the funding means new investment in the water system will quadruple over the next five years and represents “record levels of spending” by water companies.
That will provide companies with “the funding needed to transform performance, ensure supplies for future generations and to deliver cleaner rivers and seas,” it added.
Back in July, Ofwat said it had reduced the £104bn to £88bn in cases where costs had not been justified or were inefficient. But it did say it would reconsider the proposals in its final decision if water companies provided more evidence to support their proposals.
The latest projects to reduce storm overflow spills will include installing storage tanks on the sewer network, or upsizing pipes. They also include green solutions such as using catchment and nature based solutions to reduce storm overflow spills.
Water companies are already gearing up the search for contractors to carry out the ambitious package of works, with some contractors already expecting a big increase in expenditure.
Earlier this week, contractor Barhale Holdings said it expected spend by water companies in the upcoming AMP8 funding cycle “will be much greater” than it was in AMP7.
It added that it was “well-positioned to take advantage of this”.
Ofwat chief executive David Black said the investment represented an “opportunity to regain customers’ trust […] to turn around their environmental record and improve services to customers”.
“We have robustly examined all funding requests to make sure they provide value for money and deliver real improvements, while ensuring the sector can attract the levels of investment it needs to meet environmental requirements,” he added.
“This has seen us remove £8bn of unjustified costs compared with companies most recent requests. In addition, our approach to setting a rate of return has saved customers £2.8bn.”
