Question to the Department for Environment, Food and Rural Affairs:

To ask the Secretary of State for Environment, Food and Rural Affairs, what recent assessment she has made of the implications for her policies of high levels of debt in the water industry.

Water companies are allowed to raise debt to fund the delivery of their services. This is normal practice across all parts of the private sector. At sensible levels, debt can be an appropriate way to fund investment for essential infrastructure over the longer term, avoiding sharp increases in customer bills in the immediate term.

However, both Government and Ofwat recognise that levels of debt at some companies in the sector are too high. Ofwat has encouraged water companies to de-gear and the weighted average gearing across the sector fell by 4% from 72.8% in 2021 to 68.5% in 2022.

There are measures in place through ring fenced license conditions to improve the financial resilience of the sector and to protect customers. These were introduced in 2007 and were strengthened this year, following new licence modification powers that this Government gave to Ofwat via the Environment Act 2021.

The industry continues to be financially resilient and capable of raising the required investment to meet Government targets. For example, £2 billion of new equity has been injected across the industry since 2020 and in addition, in the last few weeks, we have seen £500 million of new shareholder equity going into Yorkshire Water, £120 million into Portsmouth Water and a further £750 million into Thames Water.