‘No dividing line’: consultants advising private water companies also work for their regulator, Ofwat | Water industry

The water industry regulator has spent £26.7m on business consultants in the past five years, including several companies that have simultaneously worked for private water firms, the Observer can reveal.

The findings prompted environmental campaigner Feargal Sharkey to call for Ofwat to be abolished as fellow campaigners said there appeared to be no dividing line between “those who are meant to enforce the law and those who routinely break it”.

The Observer analysed invoices paid to Ofwat’s private sector suppliers from 2019 to the first three months of 2024, collated by procurement specialists Tussell.

The firm that received by far the most income from Ofwat over that period was PwC – which netted more than £11.5m, almost half the total.

PwC audits the accounts of Thames Water, which submitted plans last week to raise bills by 56% over the next five years, as well as providing services to the wider sector.

In a document sent to potential industry clients in 2013, the firm said its “leading role in professional and standard-setting organisations puts us in an ideal position to advise on regulatory, operating effectiveness and other developments”.

Several of the other consultancy companies used by Ofwat advertise their services working for the water industry on their websites.

In March it was revealed that raw sewage was discharged into waterways for 3.6m hours in 2023 by England’s privatised water firms, more than double the figure in 2022.

At the core of the issue has been claims that water companies have invested too little in infrastructure while paying huge dividends to shareholders.

The water industry has paid shareholders £78bn in dividends in the just over three decades since it was privatised, while amassing £64bn of debt, despite being debt-free when sold to the private sector.

“What we’re looking at right now is nothing more than the physical mani­festation of three decades of political neglect, regulatory failure and corporate greed,” said Sharkey. “Ofwat needs to be abolished, and it needs to happen today,” he added. “The whole of the regulatory system of the water industry needs dismantling and utter reform, as do those companies that have milked us for nearly £80bn worth of cash, leaving over £60bn of debt behind them.

“The truth is we need to point the finger at the regulator, who simply wasn’t up to it, wasn’t capable and has to go.”

Surfers Against Sewage chief executive, Giles Bristow said: “The regulators have already been exposed for schmoozing water industry fat cats at exclusive members clubs and now this – is there anything that divides those who are meant to enforce the law and those who routinely break it?

“For people across the country, who are rightly furious about the sewage being dumped into our rivers and seas, this is a bad look at a bad time for a supposedly expert independent body.

“It’s time for Ofwat to get their house in order and put clear water between themselves and our scandal-ravaged water industry, because, right now, the picture looks very murky indeed.”

An Ofwat spokesperson said PwC was its “main delivery partner” during its price review process – where Ofwat outlines the maximum water companies can charge to users and service standards for the industry. The spokesperson said the firm delivered “additional technical expertise in areas such as financial modelling, economics and engineering”.

They added that a “rigorous conflict procedure” ensured that “any potential conflicts of interest were identified and managed appropriately”.

A spokesperson for PwC said the firm adheres “strictly to all regulatory, professional, ethical and independence standards”, and has no “decision-making responsibility” in its services to Ofwat.