Water firms look to increase bills amid fears of £400m National Insurance hit

Water companies are hoping billpayers will carry the cost of a £400m hit from rising national insurance contributions over the next five years, previously announced in the Autumn Budget.

The accumulated cost to all water firms’ in England and Wales comes to £80m per year, water industry sources told the Sunday Times.

Firms have now submitted their calculations to Ofwat, which will decide how much they can bill customers between 2025-2030 on December 19, according to the report.

Should they be unable to pass on the added burden to consumers, the companies would instead have to carry the cost themselves, possibly via cost cutting strategies involving capping salary increases or hiring freezes, it added.

The concerns will pile pressure on an industry which has faced fierce backlash for inadequate investment in its creaking infrastructure and has looked to Ofwat to resolve the issues by paving the way for significant bill hikes.

Bidders including the infrastructure investor Covalis and Scottish utlity firm Castle Water are lining up to buy crisis-hit Thames Water, which has admitted its debt pile is likely to hit nearly £18bn next March.

In a draft determination this summer, Ofwat said it would allow bill rises of 21 per cent, below what the companies had been looking for. It also leaned towards a cap of £88bn on spending, which would be a record over a five-year period but still falls short of the £104bn proposals drawn up by the industry.

The governmnet is looking to net around £25bn per year from rises in national insurance contributions, however there is concern among City groups the policy will slow growth.

Ofwat said it was “considering” whether to factor the cost of NICs into its final determination, according to the Sunday Times.

“Work on the final figures is still underway in respect to our final determinations,” a spokesperson for the regulator told City AM.

A government spokesperson said: “We have taken the tough decisions to deliver economic stability after inheriting a £22bn black hole, and have boosted public investment by over £100bn over the next five years to mend our crumbling public services and drive prosperity in every part of the country.

“To support households with the cost of living in the short term, we have increased the National Living Wage, protected payslips from higher taxes, and for the poorest families, have boosted the Household Support Fund and Discretionary Housing Payments by £1bn to help with essentials such as energy, food bills and rent.”