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Thames Water has estimated the cost of upgrading its flagship Oxford sewage works has risen from £40mn to £435mn over just four years, according to internal documents that show a suite of promised remedial projects are behind schedule and far over-budget.
The bill for its Oxford treatment plant — the largest in the Upper Thames region — has risen more than 10-fold since 2021, while work on at least three other sewage plants has also risen by millions of pounds, files show.
Additionally, essential upgrades to 13 facilities that it had promised in 2020 to complete by last month are also running late. All of the projects are behind schedule, while four will now not be completed until at least 2030, the documents show.
The improvements to the sewage treatment works are needed to prevent unknown quantities of raw effluent being tipped into the Thames river and its tributaries.
The company has repeatedly breached its licence conditions by allowing untreated material to leech into waterways, even during dry periods.
The work is badly needed as the majority of Thames Water’s sewage treatment works lack the capacity to serve their local populations, the FT reported earlier this year.
One person close to the company said that work at the 13 high priority sewage treatment plants had also been hindered because it was split between different parts of Thames Water making it “hard to resolve issues” and leading to disjointed reporting and “a lack of overall ownership.”
The work at the Oxford sewage treatment plant involves increasing capacity at storm tanks, which store effluent before it can be treated, as well as refurbishing existing assets.
The plant, which currently serves 225,000 people, will be upgraded to allow new housing developments, raising the population to around 267,000 by 2031, according to Thames Water’s own documents.
Ash Smith, of the Windrush Against Sewage Pollution (WASP) campaign, which carried out the research into price inflation, said the costs were “eye-watering and inexplicably high and just shouldn’t be blandly accepted given it is all paid for out of customer bills”.
He added: “It just doesn’t make sense when compared with similar work at sewage treatment works in Denmark or even the US.”
The documents also show the cost of improving the Witney sewage treatment works — which serves about 49,000 people — has more than doubled from £8.8mn in 2023 to £17mn now for an upgrade that involves the construction of three tanks as well as the associated groundwork, filtering, plumbing, electrical work and metering.
WASP said that it had established that such concrete tanks cost about £130,000 each, leaving “questions over how the price had leapt to such a large amount”, even if labour, material price inflation and other costs are factored in.
The cost of improving Appleton sewage treatment plant, which serves roughly 7,750 people, has risen from an estimated £5mn in May 2023 to £7mn now while at Buntingford, which serves 7,750 people, the cost has risen by 75 per cent from £12mn in May 2023 to £21mn now.
The Construction Products Association estimates that infrastructure construction costs have risen by 22.3 per cent from the start of 2021 to the end of 2024, due to double-digit increases in both skilled labour and building materials prices.
Thames Water said that “underlying operating costs had risen by around £40mn year on year, which has contributed to the increased amounts of planning and delivering these much-needed upgrades”.
It added: “Over the next five years we will deliver a record amount of investment to address our ageing infrastructure. We continue to execute our plans to upgrade over 250 of our sites across the region, including at our sites in Oxford, Witney and Appleton as we recognise that we need to make investment to meet the demands that come with population growth and climate change.”
The price increases are crucial as all of the investments are paid for out of customer bills, which have risen by an average £151 to £639 this year this April.
A report published by the official Independent Water Commission, led by Sir John Cunliffe, earlier this year said that the regulator Ofwat did not check whether companies were delivering on their business plans, which promise infrastructure improvements in exchange for bill increases.
The price of the assets is also important as it affects the regulatory asset value of the company, which in turns sets the amount that water companies raise bills by, and the price at which they can be sold.
Thames Water, which has never received any straightforward equity since its privatisation in 1989, is currently in the process of trying to raise cash and find a buyer as it struggles under a near-£20bn debt mountain. It has recently agreed a controversial £3bn loan from creditors, which comes at an expensive 9.75 per cent interest rate and fees.
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