Business Water Price Increase

2026 business water price rise

On 1 April 2026, business water suppliers increased their default water rates, which apply to most businesses.

Both the underlying wholesale costs charged by the regional water companies and the retail element charged by business water suppliers will increase above inflation.

The table below shows how the 1 April 2026 increase in water rates affected the annual water bill of the average small business in each region.

The figures are based on schemes of charges published on supplier websites, using the following assumptions:

• Annual consumption of 120 cubic metres
• A standard 12/15 mm supply pipe
• Fitted with a business water meter
• The lowest band of surface water drainage charges

2026 retail water rates increase

Retail charges applied by business water suppliers also increased on 1 April 2026 for customers on default business water tariffs.

Here is how the retail water price cap will increase for different groups of business customers:

• Businesses consuming less than 500 m³ (Group 1) – the retail standing charge will increase by 4%, and unit rates will increase in line with regional wholesale rate increases.
• Businesses consuming more than 500 m³ (Group 2) – all elements of the retail fee will increase in line with regional wholesale rate increases.

Source: Ofwat – Retail Exit Code – Permitted Adjustment 2026-27

Default suppliers typically charge the maximum retail margin allowed under the price cap, so changes to the cap are likely to affect most businesses.

Business water price cap

Since deregulation in 2017, businesses in England have been able to switch business water suppliers and secure a fixed, lower retail fee with any supplier in the market.

Despite this, around 80% of businesses have never switched and remain on default business water tariffs set by their regional default supplier.

To protect these customers, Ofwat imposes a retail price cap that limits the maximum margin default suppliers can charge and restricts annual increases.

The retail fee cap operates separately for three different groups of business water customers:

Group one water price cap

Group one definition: Small businesses that use less than 500 m³ annually.
Impacted businesses: 1,049,000 businesses (85% of the market)

Ofwat applies the following method to calculate the maximum retail business water rates that can be charged to small commercial users of water:

• Allowed Retail Cost per Customer: £67.02 This is a fixed annual charge intended to reflect the costs incurred by business water suppliers in providing meter readings, customer service and billing services.
• Net Margin: 2% This represents the permitted profit margin on top of the entire business water bill.
• Allowed Bad Debt Allowance: 2.45% This is an additional margin that accounts for business water suppliers’ exposure to the risk of customers not paying their bills.

Group two water price cap

Group two definition: Medium-sized businesses that use more than 500 m³ but less than 50,000 m³ annually.
Impacted businesses: 170,000 businesses (14% of the market)

Ofwat limits the retail business water rates that can be charged under a default contract for medium-sized commercial users of water to:

• 8% of the underlying wholesale charges for water; and
• 10% of the underlying wholesale charges for wastewater.

Group three water price cap

Group three definition: Industrial users consuming 50,000 m³ or more annually.
Impacted businesses: 12,000 businesses (1% of the market)

Ofwat does not cap the retail fee chargeable to Group Three customers. It is assumed that these high-usage businesses will actively manage negotiations for their water contracts.