Anglian Water, Northumbrian Water, South East Water, Southern Water and Wessex Water had appealed to the competition watchdog after arguing that Ofwat’s original funding settlement left them unable to fulfil their regulatory obligations.

The CMA determined that while some additional investment funding was justified, the vast majority of what the firms requested could not be approved.

The decision follows Ofwat’s late 2024 ruling that permitted average bill rises of £157, or 36 per cent, over five years to address deteriorating infrastructure.

Customers of these five suppliers can expect their bills to rise by an average of 2.2 per cent as a result of the ruling, adding to the 24 per cent average increase that Ofwat had already approved.

This represents a reduction from the provisional decision issued in October, which would have granted £556million in additional funding and pushed bills up by approximately three per cent.

The watchdog stated its aim was to strike a balance between protecting household finances and ensuring the water companies have sufficient resources to meet their legal requirements around environmental standards and drinking water quality.

Individual bill increases will differ depending on which supplier serves each customer.

Kirstin Baker, chairwoman of the independent group appointed by the CMA, said: “We’ve rejected most of the bill increases water companies asked for but allowed limited extra funding where that’s genuinely needed, balancing concerns about affordability with the need to secure our water supplies and cut pollution.”

She added: “A significant part of this extra money reflects market movements since Ofwat’s decision.”

The five firms had contested Ofwat’s original determination, maintaining that the funding allocated was insufficient to deliver on the regulatory targets set for them.

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These requirements include obligations relating to environmental protection and maintaining drinking water quality standards across their respective service areas.

The Consumer Council for Water criticised the ruling, arguing that even the reduced increases remain beyond what many households can reasonably afford.

Mike Keil, the organisation’s chief executive, said: “The additional bill increases granted by the CMA may be less than what these five water companies wanted but they are still more than what many customers can afford or will consider fair.”

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He noted that complaints to the consumer body regarding water bill affordability had nearly tripled over the past year, warning that further rises would compound financial pressures on struggling families.

Mr Keil called for reform of the appeals process, demanding that customers be granted equivalent rights to water companies when challenging proposed price increases to address what he described as a power imbalance.