The  AMP8 spending agreement is £16bn lower than in water companies’ business plans after the regulator removed inefficient spending and activity where companies have already been funded.

Around £35bn will be channelled into reducing pollution and delivering greater water supply resilience.  This more than trebles the level of investment in the 2020 to 2025 period.

The cost of this investment will initially be funded by shareholders or through borrowing, with these costs then recovered through customers’ bills over the 5-year period and beyond.

Ofwat has proposed a rate of return of 3.72%, above the level set for AMP7, reflecting increases in the cost of finance and the need to ensure the sector can raise the finance necessary to fund such a significant programme of investment.

The average bill increase for water and wastewater companies will be £19 a year over five years (£94 in total), above inflation.

Companies have been required to prepare for the future by setting their plans in the context of a 25-year delivery strategy.

These proposals include accelerating the delivery of £17bn of new water assets including 6 reservoirs, some of which are part of the wider programme of major projects; in total 9 new reservoirs are proposed.

David Black, chief executive, Ofwat said: “Customers want to see radical change in the way water companies care for the environment.

“Our draft decisions on company plans approve a tripling of investment to make sustained improvement to customer service and the environment at a fair price for customers.

“Let me be very clear to water companies. We will be closely scrutinising the delivery of their plans and will hold them to account to deliver real improvements to the environment and for customers and on their investment programmes.”