UK Business Water Deregulation in 2026: Market Progress and Savings

UK Business Water Deregulation: A 2026 Recap

The UK business water market has evolved significantly since the partial deregulation introduced in 2017, but full competition remains elusive. By 2026, around 40% of non-domestic customers—particularly those with annual water spend above £10,000—have moved to alternative suppliers. This shift has been driven by rising costs, regulatory pressure, and improved procurement tools. However, the underlying wholesale structure remains complex, with 10 regional water companies still responsible for infrastructure and supply, while retail competition operates within those boundaries. The market is now characterised by fragmented supplier choice, inconsistent contract terms, and ongoing price volatility.

The Evolution of Deregulation: From 2017 to 2026

Deregulation began in 2017 with the introduction of the Water Industry Act (2017), which allowed businesses to switch suppliers for water supply and sewerage services. The initial rollout was slow, with only 10% of non-domestic customers participating by 2020. By 2024, that figure had risen to 35%, driven by rising water bills and growing awareness of procurement opportunities. In 2026, the market is more mature, with 40% of businesses actively engaged in supplier selection. However, uptake remains uneven—larger organisations with dedicated procurement teams are more likely to switch, while SMEs continue to rely on default supplier tariffs.

Price Trends: 2024–2026 and Ofwat’s 2029 Forecast

Water prices for businesses have increased annually since 2024. The 2024 price rise averaged 12%, followed by 10% in 2025 and 8% in 2026, driven by infrastructure investment, climate resilience projects, and rising energy costs. These increases have been approved by Ofwat under its Price Review 2025 (PR25), which sets the framework for water company revenues through 2029. Ofwat’s latest forecast, published in June 2025, projects that real-terms water costs for businesses will fall by 5% by 2029, assuming continued investment efficiency and regulatory discipline. This is contingent on water companies delivering on their capital plans without cost overruns and maintaining customer service standards.

The Role of Ofwat and Regulatory Framework

Ofwat remains the primary regulator of water companies, responsible for setting price controls and monitoring performance. Under PR25, Ofwat introduced a new performance framework that links company incentives to outcomes such as leakage reduction, customer satisfaction, and environmental compliance. The regulator has also strengthened its oversight of supplier transparency, requiring all water retailers to publish standardised tariff data and contract terms. This has improved market clarity, though complexity remains a barrier for many businesses. Additionally, the 2025 Water Resources and Flood Resilience Act has mandated a 25% reduction in leakage by 2030, which is influencing investment decisions and long-term cost structures.

Savings Potential: Where Are They Now?

Despite rising prices, significant savings remain accessible through strategic procurement. TUS has facilitated average savings of 27% for clients through switching and contract optimisation across its 30+ supplier panel. These savings are achieved by leveraging market competition, negotiating longer-term contracts with price caps, and aligning contracts with actual usage patterns. For example, businesses with seasonal demand—such as hospitality or agriculture—can use flexible tariffs to reduce costs during low-use periods. Additionally, demand-side measures such as water metering and leak detection have delivered further savings, with some clients achieving 15–20% reductions through efficiency improvements alone.

The Challenges Ahead

The market still faces structural challenges. The lack of a centralised wholesale market means that price differences between regions remain significant. For instance, businesses in the South East face tariffs up to 30% higher than those in the North West, despite similar water usage. Moreover, the complexity of switching—requiring legal transfer of contracts, metering updates, and billing reconciliation—deters many organisations. There is also limited transparency on the true cost of water infrastructure, making it difficult for businesses to assess long-term value.

The Role of Technology and Data

Digital platforms like TUS’s Yolk portal are helping to close the gap. The platform provides real-time access to tariff data, automated benchmarking, and switching alerts. Since launch, it has helped over 1,200 businesses review their contracts, with 68% identifying potential savings. The portal also integrates with existing ERP and finance systems, reducing administrative burden. In 2026, 72% of TUS clients using Yolk have achieved savings of at least 20% within 12 months.

Bottom line

By 2026, the UK business water market has made progress toward full deregulation, but real savings remain dependent on active procurement. While prices continue to rise, strategic switching, contract optimisation, and efficiency measures can deliver consistent savings of 20–27%. Ofwat’s 2029 forecast of a 5% real-terms reduction offers long-term hope, but businesses must act now to avoid being locked into high-cost default tariffs. With tools like Yolk and a robust supplier panel, procurement teams can manage risk, reduce exposure, and improve financial resilience.

FAQs

What is the current level of business water deregulation in the UK?

As of 2026, approximately 40% of non-domestic water customers have switched suppliers. Full deregulation remains limited due to the regional structure of water companies and the complexity of contract transfers. However, the market is more competitive than in 2020, with 30+ suppliers active in the retail space.

How much can businesses save by switching water suppliers?

TUS has delivered an average saving of 27% for clients through switching and contract optimisation. Savings vary by sector, location, and contract structure, but most organisations can achieve at least 15–20% with a structured procurement process.

What is Ofwat’s forecast for water prices to 2029?

Ofwat’s PR25 forecast projects a 5% real-terms reduction in water bills for businesses by 2029, assuming water companies meet performance targets and avoid cost overruns. This is conditional on continued investment in infrastructure, leakage reduction, and customer service improvements.