UK water sector faces massive upgrade costs

Britain's water sector will need to pour GBP 290 billion ($386 billion) into its outdated infrastructure over the next 25 years to meet environmental and supply challenges, the public spending watchdog warned Friday.

Water companies, privatised since 1989, have come under fire in Britain for allowing the discharge of large quantities of sewage into rivers and the sea.

This has been blamed on under-investment in its infrastructure, which dates back largely to the Victorian era.

"The sector now needs to attract an unprecedented amount of investment," the National Audit Office (NAO) said in a report.

A total of GBP 47 billion must be spent on upgrading infrastructure in the next five years, as part of the GBP 290 billion needed to meet government targets over the next 25 years, it added.

"Regulators have not managed the rising tide of risk associated with the sector, which is contributing to increasing bills for customers," the report said.

Water regulator Ofwat has allowed Britain's largest water supplier, Thames Water, to hike the average household's bill by 35 percent over five years.

Thames Water, facing a mountain of debt and outdated infrastructure, is seeking a private buyer to help it avoid a costly public bailout.

"The water sector faces significant challenges. To meet these, it is necessary to attract investment for the improvements needed," Ofwat said in a statement responding to the report.

The government and regulators have "failed to drive necessary investment for the sector, which now faces significant environmental, supply and infrastructure challenges," the NAO said.

It urged action, stating that at the current rate, it would take 700 years to replace the entire existing water network.

"The need for investment coincides with a period of weakening financial performance, declining public trust and falling investor confidence," it added.

The UK's Department for Environment, Food and Rural Affairs responded to the report, saying that it has taken "urgent action to fix the water industry -- but change will not happen overnight."