Three water companies are facing a combined fine of £168m after a series of failings, including over sewage treatment.
The proposals by regulator Ofwat include a penalty of £104m for Thames Water.
Yorkshire Water faces a £47m fine, while Northumbrian Water will have to pay £17m.
It comes after an Ofwat investigation found the firms had “routinely released sewage into our rivers and seas, rather than ensuring that this only happens in exceptional circumstances as the law intends”.
The regulator said it would consult on the level of the fines before the companies are ordered to pay up and could potentially reach a settlement with them instead.
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Ofwat chief executive David Black said: “Ofwat has uncovered a catalogue of failure by Thames Water, Yorkshire Water and Northumbrian Water in how they ran their sewage works and this resulted in excessive spills from storm overflows.
“The level of penalties we intend to impose signals both the severity of the failings and our determination to take action to ensure water companies do more to deliver cleaner rivers and seas.”
He added: “These companies need to move at pace to put things right and meet their obligations to protect customers and the environment.”
The regulator has the power to fine firms up to 10% of their turnover. The proposed penalties are the equivalent of 9% of Thames Water’s turnover, 7% of Yorkshire Water’s and 5% of Northumbrian Water’s.
There has been increasing concern over pollution of the UK’s rivers and coastlines in recent years.
Analysis of Department for Environment, Food & Rural Affairs data suggested sewage was dumped into rivers, lakes and beaches designated “safe to bathe in” an average of 86 times a day in 2023.
Environment Agency figures also showed untreated sewage discharges doubled from 1.8 million hours in 2022 to a record 3.6 million in 2023.
Several water companies have also come under growing scrutiny over their financial health and plans to increase bills.
Thames Water in particular is facing major financial challenges. Credit ratings agency Moody’s recently downgraded its debt to “junk” status.
However, Mr Black told Sky News the regulator would “not relent” from ensuring water firms complied with their obligations “whatever the financial circumstances of the company”.
He added the fines would not lead to higher bills and would instead “sit with investors”.
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Campaign groups welcomed Ofwat’s announcement but said further action was still needed.
Greenpeace UK’s Doug Parr said it was “good to see this rogue industry finally paying the price for years of pollution”.
Charles Watson, founder of River Action, said: “Thankfully the water regulator, for so long toothless, is finally waking up to the scale of the public’s outrage”.
He added: “However, remember that the water industry was able to find more than £11bn to hand out to their shareholders in dividends last year, which gives context to these fines.”
Redress ‘needs to be affordable’
Yorkshire Water said it was “disappointed” and said it would “continue to seek clarity” over the proposed penalty.
A spokesperson said: “We take our responsibility to protect the environment very seriously. Last year, we apologised for not acting quickly enough and announced our £180m programme to reduce discharges from our storm overflows before April 2025.”
They added: “We and our customers care deeply about river health and we want to provide reassurance that we have already taken considerable action to improve.”
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A Thames Water spokesperson said: “We take this matter very seriously and have cooperated at every stage of Ofwat’s investigation.
“We regard all untreated discharges as unacceptable, even when they are permitted, and are taking action to improve the health of our rivers as a key area of focus and investment.”
They added: “We are encouraged that Ofwat recognises that in order to resolve the issues identified any redress needs to be deliverable, affordable and financeable.”
A Northumbrian Water spokesperson said it was “very disappointed” by the decision and did not “recognise some of the standards of compliance that Ofwat is enforcing”.
They added: “These are a departure from its previous practice and appear inconsistent with those of the Environment Agency and the government and with Ofwat’s own practice in the past.
“We’re working really hard to continue to deliver for customers and the environment and will continue to comply with and exceed government regulations.”
Environment Secretary Steve Reed welcomed Ofwat’s announcement as he vowed the government would “fundamentally reform the water sector”.
He said Labour would “outline further legislation to transform and reset our water industry and restore our rivers, lakes and seas to good health”.
The announcement by Ofwat on Tuesday is thought to be a record combined fine for sewage failings.
In 2019 Southern Water was ordered to pay a record £126m package of fines and customer rebates over issues including sewage management and deliberately misreporting its performance.