How to adapt your collections strategy, support customers in water poverty, and prove good outcomes as Ofwat gives way to a single, supervisory regulator.
Record bills, record-low trust, record debt. Sources: CCW bill rise analysis, January 2026; CCW Water Matters, May 2026; CCW and University of York water poverty and debt collection research, August 2026.
The water sector is asking customers to pay more than at any point since privatisation, and trusting them less than ever to be happy about it. Average bills rose by a record 26% in April 2025, then a further 5.4% in April 2026, taking the average household water and sewerage bill to £639. The rises fund £104 billion of investment through to 2030, and most customers accept the case for it. But trust in water companies has fallen to 6.07 out of 10, the lowest score in the 15 years CCW has tracked it, and just 44% of households believe what they are charged is fair. More than 4 million households are already in debt to their water company.
Bills up, trust down, debt rising. And the government’s answer is to abolish the regulator.
That answer arrived in A New Vision for Water, the White Paper published in January 2026 in response to the Cunliffe Review. Ofwat will be replaced by a single integrated regulator combining the water functions of Ofwat, the Environment Agency, the Drinking Water Inspectorate and Natural England, operating a supervisory model with company-specific oversight and the power to intervene early. Customers get a new Water Ombudsman with legally binding powers. For collections and customer teams, it means being judged continuously, company by company, on whether customers in debt end up in a better position, not on whether a code of practice was published.
This guide covers what has been decided, what already applies to water debt today, and what collections teams should do before the new regulator arrives.
The reset has moved quickly:
The road to water’s regulatory reset. Sources: HM Government, A New Vision for Water, 2026; Independent Water Commission, 2025.
October 2024. The UK and Welsh Governments launched the Independent Water Commission under Sir Jon Cunliffe, the largest review of the industry since privatisation.
July 2025. The Cunliffe Review published 88 recommendations and concluded the sector needed a fundamental reset, including abolishing Ofwat, creating a single regulator for England, and converting CCW’s complaints role into a mandatory Water Ombudsman. The government accepted the headline recommendation the same day.
January 2026. The Starmer government published A New Vision for Water, confirming the single integrated regulator, a supervisory approach that scales intervention according to risk, a new Performance Improvement Regime for underperforming companies, and the Water Ombudsman. It promised a Transition Plan in 2026 and a water reform bill during this Parliament.
July 2026. Andy Burnham became Prime Minister, with Angela Eagle appointed Environment Secretary, returning to the department where she served as a minister while the White Paper was prepared. The reform programme continues, and early signals point to it hardening rather than softening under a Prime Minister who has made water a stated focus. The Transition Plan remains unpublished, and the legislation is now widely expected by the end of 2026.
The transition. The current regulators have been directed to sharpen enforcement during the transition rather than wait for the new body. Ofwat and CCW are already tightening scrutiny of how companies support customers in debt, including CCW piloting debt audit assessments with individual companies.
For collections leaders, the trap in this timeline is the word “transition”. The temptation is to wait and see what the new regulator wants, a temptation the change of government makes stronger, because the final shape of the reforms is now less certain than it was in January. But the direction is not. Every plausible version of what comes next, from the White Paper as written to a more interventionist Burnham programme, asks more of water companies on customer treatment, not less. And the rules that govern water debt today are already binding, already being audited, and unaffected by who holds office.
Lenders had their Consumer Duty moment in July 2023, when the FCA made delivering good customer outcomes a binding obligation rather than good practice. Water’s equivalent arrived with less fanfare in February 2024, when Ofwat introduced a customer-focused licence condition into the licence of every water company in England and Wales. It is a binding obligation covering how companies treat customers, with specific weight on customers who are struggling to pay and customers in debt.
The licence condition is underpinned by Ofwat’s Paying Fair guidelines, which set minimum expectations across the whole payment and debt journey: proactive contact with customers showing signs of payment difficulty, repayment arrangements based on ability to pay, tailored debt management for customers in vulnerable circumstances, access to debt advice and income maximisation, and the same standard of care when an account sits with a debt recovery agent as when it sits with the company. The Service for all vulnerability guidance and Priority Services Register standards sit alongside it, and Service for all has already produced a public commitment: every company published its final vulnerability strategy by June 2025, giving the regulator a written baseline to mark each company against.
Ofwat’s Paying Fair guidelines set minimum expectations across the whole payment and debt journey, underpinning the customer-focused licence condition.
So far, though, compliance with Paying Fair has rested largely on companies’ own submissions. Ofwat’s assessments found companies confirming they meet the principles, and CCW’s debt audits exist precisely to check whether the confirmations survive contact with the evidence. Under the new supervisory model, that self-certified world ends. A dedicated supervisory team sitting inside the regulator, scaling its intervention to risk, does not ask whether you have a policy. It asks you to show, account by account, what happened.
Four features of the new framework matter most for collections and customer operations.
Supervision replaces periodic review. The new regulator will run continuous, company-specific oversight on a risk ladder, with a Performance Improvement Regime for companies that fall short. In practice, the gap between a problem emerging in your collections data and a regulator asking about it shrinks from years to months.
Performance goes public. The White Paper commits to strengthening C-MeX, the customer experience measure that already ranks companies against each other, and the direction across regulated sectors is towards publishing more performance data. Debt handling is becoming a published differentiator, and the trust deficit gives the league tables an audience.
Complaints get teeth. The new Water Ombudsman will have legally binding powers to resolve customer complaints, replacing the voluntary scheme. Billing and charging are already the biggest source of complaints for almost every company, and CCW reports affordability complaints up 110% year on year, with complaints about the scale of bill increases up 138%. When a complaint about collections sits in one system and the collections activity it relates to sits in another, the evidence is fragmented. Once an ombudsman can issue binding decisions on that complaint, fragmented evidence becomes a liability.
Affordability stays with companies. The White Paper did not adopt the national social tariff that CCW and the Cunliffe Review pushed for. Instead, the government expects companies to deliver their 2019 commitment to end water poverty by 2030, with improved guidance on social tariffs and more consistency across schemes. The postcode lottery, where support ranges from £120 to £314 a year depending on the company, remains each company’s problem to defend. Around 2 million households now receive a social tariff, up 22% in a year, but CCW’s latest research puts 1.8 million households in water poverty, spending more than 5% of post-housing income on water, exceeding the threshold by a median of £337 a year. Customers in water debt are more than twice as likely to be in water poverty as others.
The gap between a problem emerging in your collections data and a regulator asking about it shrinks from years to months.
Water collections has a structural feature no other utility shares: since 1999, companies cannot disconnect a domestic customer for non-payment. There is no prepayment meter route, no supply-based consequence at all.
That is the right policy for an essential service. It also means water collections has no stick, only engagement. When household budgets tighten, the water bill is the rational one to deprioritise, and arrears build silently, sometimes for years, before anyone has a meaningful conversation. It is how the sector arrived at more than 4 million households in debt, and why bad debt in water is mutualised across every other customer’s bill.
“Water is the one sector where collections has no lever except the quality of the conversation. That was always true. The difference now is that the regulator is about to start measuring it.”
James Hill, CEO, Flexys
The consequence for strategy is blunt: in water, the quality of engagement is not one input to collections performance. It is the entire mechanism. Which is exactly what a supervisory, outcomes-focused regulator will measure. Three shifts follow.
Find the debt before it finds you. Without a disconnection event to force contact, the first signal of difficulty is behavioural: a cancelled Direct Debit, a first missed instalment, a broken arrangement, a change in payment pattern. Each should trigger immediate, low-friction outreach, not a place in next quarter’s dunning cycle. Paying Fair already expects proactive contact; the supervisory model will expect evidence of it, account by account. The same logic extends earlier still, to acting before the first payment is missed: our guide to implementing an effective pre-arrears strategy covers that ground in depth.
Make the arrangement the product. The measure of a repayment plan is not that it was agreed but that it holds. That means an affordability conversation before recovery action, terms the customer can sustain, and adjustment when income changes. Consumer Scotland’s recent research into water debt collection found the opposite pattern: minimal early engagement, cases passed to collection agents or enforcement with no notification, legalistic communications, and customers too ashamed to seek help. Scotland’s collection route through Council Tax is different, but the regulator-commissioned findings read as a checklist of what evidence against a water company will look like anywhere in the UK.
Maximise income before setting the plan. Affordability has two sides, and collections conversations usually work only one of them. Billions of pounds in benefits and social tariff support go unclaimed every year, often by exactly the households sitting in arrears queues. Social tariff awareness has passed CCW’s 53% target, but awareness is not uptake. A benefit entitlement check inside the collections journey, using the income and expenditure information already being gathered, turns the affordability conversation from “what can you pay” into “what should you be receiving”, and gives the arrangement a review point for when the new income arrives.
Payment method matters here too. A failed Direct Debit is one of the most common triggers for an account entering arrears, because Direct Debit assumes a fixed amount on a fixed date, which is what a customer in difficulty cannot commit to. Variable Recurring Payments, live since June 2026 under the UK Payments Initiative scheme with utilities in the first wave of eligible sectors, let a customer authorise flexible payments within a cap they control. Arrangements that flex with the customer’s income are arrangements that hold.
Metering is about to sharpen both sides of this. The White Paper commits to accelerating the smart meter rollout, which means millions of households will move from rateable-value bills to consumption-based ones over the coming years. Every switch is a potential bill shock, and an undetected leak on a newly metered supply is one of the fastest routes from a clean payment record to a disputed bill and arrears. The same data cuts the other way: consumption and payment signals, read together, give water companies the early-distress detection that smart-metered energy suppliers already use. Which of those two stories a company ends up telling the regulator depends on whether its collections system can see the meter data at all.
The national social tariff the White Paper declined to create has not gone away. Citizens Advice argues the powers to implement one already sit on the statute book in the Water (Special Measures) Act 2025, and CCW repeats its call for a single scheme every time bills rise. A government elected on running essentials in the public interest, with a 10-year plan due in late 2026, is not an obvious brake on that momentum.
The detail collections teams should notice is not whether a single tariff arrives but how the consumer bodies want it built. Citizens Advice’s central design principle is automation: eligible customers identified and enrolled from data, not applications, because application-based support is precisely why so much of the help on offer never reaches the households that qualify for it. Energy is already there. Ofgem’s Debt Relief Scheme requires suppliers to identify eligible customers automatically from account and payment data and evidence every decision, and our guide to preparing for Ofgem’s Consumer Outcomes covers what that shift demands of collections teams.
If water support moves the same way, and the direction of every recent intervention suggests it will, a water company will need to run eligibility identification across its whole book: who is on which tariff, who shows payment distress, what support was offered, what was taken up, with an audit trail behind each answer. A company whose collections history lives across spreadsheets, dialler exports and agent portals cannot run that exercise reliably, let alone defend it to a supervisory regulator afterwards. The time to fix that is before the scheme is announced, not in the implementation window.
The supervisory question for each expectation is not “do we do this?” but “can we prove it, per account, on demand?” A practical self-assessment:
Early engagement. Can you show when the first sign of payment difficulty appeared on an account and what your system did about it, before formal recovery action started?
Affordability. Can you evidence that repayment plans reflect individual circumstances, and report arrangement survival rates over six and twelve months?
Vulnerability. Can you show how a vulnerability flag was raised, what support followed, how communications were adapted, and that the account was excluded from agent placement where your policy requires it?
Third parties. When an account sits with a debt recovery agent, can you evidence the customer received the same standard of care, with the agent’s actions in the same auditable record as your own?
Social tariffs and support. Can you show, per account, that eligible customers were told about support, what they took up, and what difference it made to the arrangement?
Complaints. When a customer in debt complains, is the complaint tracked and resolved in the same record as the collections activity it relates to, ready for an ombudsman with binding powers?
Board reporting. If the new regulator’s supervisory team asked next quarter how your collections activity delivers good outcomes for customers in debt, could your systems supply the answer, or would it be a manual trawl?
If several answers are “not yet”, the gap is usually not policy or intent. It is that the evidence lives in too many places, or nowhere at all.
Ofwat’s replacement is coming, and a new government may yet redraw parts of the blueprint. What will not change is the direction, which is already written into the licence condition and guidelines that bind water companies today. The companies that adapt early will spend the transition reducing debt, sustaining arrangements and closing the water poverty gap. The ones that wait will spend it reconstructing evidence for a supervisor who no longer accepts self-certification, under a government that has put water at the centre of its programme.
Flexys builds collections software for lenders and utilities. Its clients include banks and finance providers that have operated under the FCA’s Consumer Duty since 2023, evidencing good customer outcomes to their boards and their regulator for three years, and business water retailer Water Plus, which manages more than 500,000 customers in the Flexys system. Water Plus’s recent results show what engagement-led collections delivers, and they run directly against the sector’s story: across two financial years in which its average tariff rose by around 30%, average 60+ day debt among its core customers fell to £310, average days to pay dropped from 93 to 63 after new collections journeys went in, and complaints about its collections processes fell by 25%. The capability water companies now need is the one those clients already rely on: the complete record of collections activity, including every communication, arrangement, action and decision, with a full audit trail in one system, alongside a customer self-service portal, configurable workflow automation, integrated benefit entitlement checking through its partnership with Inbest, and an optional integrated complaints management module that keeps complaint handling inside the same auditable record. Where clients have deployed the Inbest-powered benefits check, 90% of customers running it found unclaimed benefits they were eligible for, averaging £830 a month, and customers can check and apply without leaving the software. That is the evidence base supervisory regulation demands, and the engagement-first collections capability a sector without disconnection depends on.
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This guide describes published government policy, regulation and consultations in plain terms and does not constitute legal or compliance advice. Regulatory positions may change as the transition develops. Consult a qualified adviser on how the reforms apply to your organisation.