On July 21st 2025, the Department for Environment, Food & Rural Affairs announced a major change to the regulation of the water industry in the United Kingdom whereby current regulator Ofwat will be abolished.
Ofwat has been the economic regulator for water and sewerage services in England and Wales since 1989, when the industry was privatised.
In its place will come a single, more powerful regulator combining Ofwat with the Drinking Water Inspectorate and Natural England – responsible for water quality and environmental oversight respectively.
The recommendation for a new regulator was put forward in a review of the water industry carried out by Sir Jon Cunliffe, a former deputy governor of the Bank of England.
And the government have wasted not time upon acting on the Independent Water Commission Report. The environment secretary, Steve Reed, said following its release: “The government will abolish Ofwat.”
“In the biggest overhaul of water regulation in a generation, we will bring water functions from four different regulators into one.”
“A single, powerful regulator responsible for the entire water sector will stand firmly on the side of customers, investors and the environment and prevent the abuses of the past.”
Why Ofwat is being abolished?
Sir Jon said in his report that the water regulatory system in England and Wales is “fundamentally broken.” He even went so far as to liken it to a modern Great Stink, which turned the River Thames into an unbearable, foul-smelling sewer filled with raw sewage in 1858.
The Great Stink sparked the construction of Joseph Bazalgette’s revolutionary underground sewer system for the capital. Sir Jon feels Ofwat and water regulation in England and Wales has reached a similar catastrophic breaking point.
What then has gone so wrong for Ofwat? Officials cite two key reasons. Having separate regulators for economic, environmental and drinking water issues has led to confusion, poor coordination and each regulator looking out for their own self-interest.
Ofwat has also been heavily criticised for allowing companies to prioritise shareholder payouts over infrastructure and environmental standards.
Take Thames Water, for example. It should be inconceivable that a water company on the verge of bankruptcy at the same time continues to pay vast sums to shareholders.
The Independent Water Commission report
Ofwat being abolished was not the only recommendation to come out of the Independent Water Commission Report. The report itself ran to 464 pages and contained a total of 88 recommendations for fixing the water industry.
Eight regional water system planning authorities are to be created in England, aligned with river basins. Wales will have its own national authority. Their role will be to coordinate local investment and planning.
A water ombudsman with binding powers to resolve consumer complaints will be introduced. Consumer advocacy is to be shifted to Citizens Advice.
Long term planning for the next 25 years will be covered by the development of a National Water Strategy with five-year reviews.
Other proposals include compulsory water metering to measure and manage use, a national social tariff for vulnerable households, powers to block harmful takeovers of water companies and stricter environmental enforcement.
When Ofwat will be abolished – and the new regulator take over
Ofwat will not be abolished straight away. There will be an operational transition to the new regulator as the government passes the required legislation through parliament.
A water reform bill is expected to start the process in autumn. Five key recommendations from the Independent Water Commission Report are to be fast tracked, followed by broader changes over the next few years. Full structural reform is expected by 2027 or later.
The environment secretary has emphasised the urgency of cutting sewage pollution by 50 percent by 2030. This can be done by tightening rules on storm overflows, improved wastewater pipe repair response times and scaling up investment. £104 billion has been earmarked for infrastructure upgrades.
The possible impact of Ofwat being abolished
Such seismic changes to the water industry and the way it is regulated will have a huge impact on utilities suppliers and consumers.
Compulsory water metering, social tariffs and an ombudsman could enhance or improve fairness over bills and recourse.
Yet Sir Jon told BBC Breakfast after his report was released that bills may have to rise beyond the 26 percent average increase between 2024-25 and 2025-26.
“The problem comes when you suddenly go from not investing for a long period, to massive investment in order to catch up,” said Sir Jon.
“That is really what has driven those huge bill increases that we have seen. So over time I think we are going to see the cost of producing water rise. That is inevitable.”
Regional planning bodies promise more coordinated, proactive investment. They could even easy housing and development bottlenecks created by concerns or problems with water supplies.
A streamlined, stronger regulator may better enforce environmental protections. It has the potential to drastically reduce sewage pollution; a hot topic in recent years given the well-publicised state of rivers in England and Wales.
Not everyone is convinced about the difference a new regulator can make, however. Some believe what comes after Ofwat is abolished will be nothing more than a more shiny version with the same behaviour and structural issues.
Then there is the real elephant in the room – privatisation. Campaigners for renationalisation argue any reforms ignore the root problem – private ownership and profiteering.
The government explicitly restricted the Independent Water Commission from considering public ownership of the water sector in its review.
A landmark shift in water governance
Ofwat being abolished marks a landmark shift in water governance framework. Driven by decades of underinvestment, infrastructure decay and environmental lapses, the move signals urgent political will to transform a system many see as underperforming.
But the real test will be in how these plans are implemented – and whether the new regulatory architecture can genuinely deliver cleaner rivers, fairer bills and resilient infrastructure without falling into familiar pitfalls.
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