Loading More Content
Ofwat (officially the Water Services Regulation Authority) are the non-ministerial government department and economic regulator for the water industry in England and Wales. Their primary goals are to ensure that the water system protects consumers (think fair pricing, transparent terms, etc), that the system both maintains and increases its reliability (for example, the repair of pipes and consistent flow), and that water companies themselves are properly run (think governance, funding, alignment with ESG targets, etc).
Generally, Ofwat is focused on the economic aspects of the industry (drinking water quality is covered by the Drinking Water Inspectorate, and environmental targets are overseen by the Environment Agency), though there is somewhat of an overlap at points (and Ofwat are able to issue fines based on non-compliance in those areas).
The body was introduced in 1989 in conjunction with the privatisation of water authorities in England and Wales, and its powers are mostly laid out by the Water Industry Act 1991. The Water Act 2014 slightly amended these powers further, as have a number of environmentally focused Act of Parliament, which give the regulators more extensive abilities to discipline non-compliant bodies.
Ofwat is funded primarily through licence fees paid by the water companies that it oversees as a regulator.
There have been a series of fines issued by Ofwat in recent months.
The most recent fines announced in early June have been issued against Northumbrian Water, who has agreed to pay a sum of over £15 million following investigations that have uncovered a failure to meet targets relating to maintaining its water and sewage networks. The proceeds of this fine have explicitly been earmarked for local environmental groups and projects to continue improving local water infrastructure (as opposed to just being kept by Ofwat or another branch of the government, as is sometimes the concern amongst consumers).
An Ofwat senior director commented that ‘our investigation has found failures in how Northumbrian Water has operated and maintained some of its sewage works and networks, which has resulted in excessive spills from storm overflows’. In response, Northumbrian Water’s chief executive stated that they ‘agree with Ofwat’s announcement that the financial settlement will be directed into speeding up our storm overflow reduction plans and in meaningful local initiatives via our Branch Out fund’, and specifically went on to point out that the bill will not be paid out of customer bills (but rather via shareholders), which is especially interesting given the fact that the company announced a 21% increase in bills late last year (rising water bills are a major concern amongst consumers).
This is not the first major fine in recent times, however. Just a few weeks earlier, in May, Ofwat issued its largest ever fine – totalling over £120 million – to major industry name Thames Water, stating that the company had ‘let down its customers and failed to protect the environment’. Thames Water has been especially criticised for a number of sewage leaks in recent years, which have led to its failure to meet a number of ESG-adjacent targets.
The situation (in relation to issuing fines) is complicated further by the fact that a number of water companies are already in serious financial difficulty. Thames Water, for example, is currently sitting on around £20 billion of debt. It had recently been in talks with private equity firms such as KKR to inject around £4 billion of capital, but those talks now appear to have cooled.
Many commentators fear that government intervention is almost inevitable, meaning taxpayers could ultimately have to foot the bill. Private equity investment is not without its risks either, however – such investment companies have been widely criticised for stripping assets out of companies (although in Thames Water’s case, it is unclear if there are substantial assets even remaining at this point) and worsening their financial state, with the sole concern of increasing their own profits. Overseeing how these proposed deals come together is again one of Ofwat’s responsibilities.
On the whole, public trust in the water industry has plummeted in recent years.
For example, the Consumer Council for Water conducts research in this area, and announced in 2024 that 40% of respondents believed that water companies prioritise pure profit over providing an acceptable standard of service to consumers.
Public bodies concerned about the environmental impact of water company behaviour have also been highly vocal in recent years – in 2024, a number of protests and demonstrations were held by groups such as River Action, who fear the impact on both humans and animals using rivers and other bodies of water across the country.
There are a number of points to unpack here for aspiring lawyers – whether future solicitors or barristers. Many of these talking points are highly prominent in the news and public perception at the moment, and so will demonstrate that you have been keeping up with current affairs. If you can tie those points to commercial issues which may affect companies and, in turn, the law firms who work with them, then you will also be demonstrating a high level of commercial awareness, which corporate-focused law firms or chambers are especially interested in seeing. These points could be deployed across a broad range of pupillage or vacation scheme/training contract applications and interviews.
You might want to think about this story from a number of angles. To show that you understand these businesses (often clients of major law firms) as a whole, you could zoom out and discuss some of the issues they face as a business (and as an industry altogether) – lawyers do need to be aware of the bigger picture in order to advise their clients effectively, becoming a broadly trusted advisor rather than just legal counsel.
If you do want to take a more explicitly legal approach, you might break this down in terms of practice areas. Understanding how companies interact with public bodies like regulators, especially if disputes arise between them, is a key aspect of public law, which may present itself via teams such as ‘regulation’. On the aspects of pollution (e.g. sewage leaks into rivers), you might consult a specialist environmental lawyer, or at least make sure you are up-to-date on relevant ESG trends.
You might even want to understand how the finances of big water companies work in practice, and look into financial practice areas. Many companies will fund themselves through a mix of equity finance (issuing stakes in the company to shareholders), traditional debt finance (taking on loans) and capital markets (issuing bonds, for example) – there is a lot of profitable work available in this area amongst top-level Magic Circle or elite US firms, for example. In short, this story can be dissected effectively from various angles.
Loading More Content