A damning NAO report said the sector needs to ‘attract an unprecedented amount of investment’ to address the challenges facing the water industry as sewage spills reach unacceptable levels.

Three out of 16 water companies have been blocked from making ‘certain financial transactions without Ofwat’s permission’ because of poor credit ratings. This included the ability to make dividend payments, which has pushed up prices for consumers as the ‘credit worthiness of the sector’ continues to decline.

The sector as a whole reported operational losses of 3.4% over the last four years, however, this was not as bad as Ofwat predicted after companies ‘mitigated the operational losses through financing gains due to paying a lower cost of debt, and lower amounts in tax’, the NAO explained.

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